Opposition Brief — Johnson v. Manhattan R. Co.

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i TABLE OF CONTENTS.

; STATEMENT OF Facts..... OP Ee Sata aa eel nite Rapp ony:

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SUMMARY OF ARGUMENT. ................005: oC

Point ONe& [Answering Petitioner Johnson's Point 1,

Subdivision (a) |—It was not necessary for the Circuit

Court of Appeals to make any determination as to the

, validity or effect of the Division of Business Order in

order to sustain Judge Manton’s power to appoint

Receivers in the Brake Nhoe suit... 2.2... Sabeeves

Pont Two-—[ Answering Petitioner Johnson's Point I,

Subdivisions (b) and (¢) and Boehm's Point I1]—

The tinding in the Order of Designation that public

interest required the designation is conclusive upon

the Court and litigants........ Saeeeueserss enews

Point Turkee [Answering [etitioner Johnson's Point

11 |—Rules t-a and Ll-a were at most directory and the

failure to observe the same did not deprive Judge

Manton of jurisdiction. ............. vieauae eseeeee

If Rules l-a or ll-a be more than directory, they are

ets! Mec tchcce, CE ET EEE COC ET TET

Pornr Four [Answering Petitioner Johnson's Point

111|—The petitioner could have made all of his ob-

jections to the receivership on the return day (Sep-

tember 22, 1932) of the order to show cause respect-

ing the appointment of temporary Receivers without

intervention in the Brake Shoe suit and without the

necessity of filing an independent suit such as the

Johnson suit........ ry att ji ous te caueeaee hee

SEI AIOE PGE SO my Da Ray

wnat ~™

PAGE

Post Five [Answering Petitioner Johnson's Point

IV |—None of the matters presented in Point [V ( Pe-

tioner’s Brief, p. 21) were considered before Judge

Woolsey or passed upon by him or considered or

passed upon by the Circuit Court of Appeals, and they

are not involved in this petition. ................... 17

PON + 6 6 Fad deco 0 be ned osebnesadheowsesece, IS

POOS AS SWU RI UREN NE Rah Kn hddeoded deeds vabdedades. 19

(A statement of certain actions taken in the Brake

Shoe suit since October 18, 1932, which do not ap-

pear on the Record. )

TABLES OF AUTHORITIES.

CASES CITED.

PAGE

Christian Vv. Hoe (C. OC. A. 2d, Feb. 20, 1955, not vet

I 656 e SAMAR ORROeeRE KOs sr Des ercnecaen ne 16

Ez parte United States, 226 U. ®. 420... 2.2.2.2 cee 13

Sortie ©. Breeteege, Fre 0. BH. DB. 1 wc cccccccsscssce 7

Kingsport Press, Ine. +. Brief English Systems, 64 Fed.

ee Ge a A ED i keene ccseneccesscsces 16

Michigan Vv. Michigan Trust Co., 286 U.S. 334........ 7

Mitchell vy. Lay, 48 Fed. (2d) 79 0. C. A. 9th, 1930)... 16

Pacific Northwest Packing Co. vy. Allen, 109 Fed. 515

Ss ae Ms ES SER An cds deedecesacctinsroceanoses 16

1 nited States v. Gill, 292 Fed. 156 (C. C. AL 4th, 1923)..0 11

STATUTES CITED.

Inited States Code, Title 28:

Section 1:5 (Judicial Code, Sec. 9).............-4-. 13

Section 17 (Judicial Code, Sec. 13)................ 14

Section 18 (Judicial Code, Sec. 14)..... ies seeacas 14

Section 22 (Judicial Code, Sec. 18)...............-. 13

Section 23 (Judicial Code, Sec. 19)................ 13

Section 27 (Judicial Code, Sec. 23)................ 12, 14

Section 731 (Judicial Code, Sec. 25)............... iz

FeperaL Eoviry RULES CIrep.

ee Ak eee A RRA Ed MO OER ORSh Reda we 15

GR a a Re os Oe Pere oe.

RULES oF THE UNITED StratTes District CouRT FOR THE

SovuTHERN District oF New York CITED.

INR oe io RR aD 4, 7, 11, 12, 13, 14

EST TaN ee OS BP Oe 4,7, 11, 12, 13, 14

ieee.)

IN THR

Supreme Court of the United States

No. 711 AND No. 721.

BENJAMIN F. JOHNSON,

Petitioner,

against

MANHATTAN RAILWAY COMPANY et al.,

Respondents.

Tiib AMERICAN BRAKE SHOE AND FOUNDRY

COMPANY,

Respondent,

against

INTERBOROUGH RaApPip TRANSIT COMPANY,

Respondent.

IN THE MATTER

OF THE

INTERBOROUGH-MANHATTAN RECEIVERSHIP

PROCEEDINGS.

BRIEF IN OPPOSITION TO PETITION FOR WRIT

OF CERTIORARI ON BEHALF OF:

VICTOR J. DOWLING AND THOMAS E. MURRAY, JR., RECEIVERS

OF INTERBOROUGH RAPID TRANSIT COMPANY.

WILLIAM ROBERTS, RECEIVER OF MANHATTAN RAILWAY

COMPANY.

CHARLES HAYDEN AND OTHERS AS A COMMITTEE FOR THE

PROTECTION OF THE HOLDERS OF THE TEN-YEAR

SIX PER CENT. GOLD NOTES OF INTERBOR-

OUGH RAPID TRANSIT COMPANY.

VAN S. MERLE-SMITH AND OTHERS AS THE PROTECTIVE COM-

MITTEE FOR MANHATTAN RAILWAY COMPANY CON-

SOLIDATED MORTGAGE 4% BONDS.

The petition of Benjamin F. Johnson for a writ of certi-

orari was served on counsel for the Interborough Receivers

on February 20, 1933. On February 27, 1935, a brief in sup-

port of the petition of Johnson (entitled, however, “Petition

and Brief’) was served on counsel for the Receivers by the

intervenor Lillian Boelim. This brief is presented in opposi-

tion to both the Johnson petition and the Boehm petition.

Statement of Facts.

On August 26, 1932, on the bill of complaint of The Ameri-

ean Drake Shoe and Foundry Company (RR. 153) and the

answer of the Interhorough Rapid Transit Company (R.

171), Honorable Martin T. Manton, Senior Circuit Judge of

the United States Circuit Court of Appeals for the Second

Cireuit, holding a District Court of the United States pur-

suant to designation, appointed Victor J. Dowling and

Thomas FE. Murray, Jr., temporary Receivers of the Interbor-

ough Rapid Transit Company (R. 180).

The order of appointment directed that the parties to the

proceeding show cause on the 22nd day of September, 1932,

“why the said receivership should not be continued during

the pendency of this suit aud upon the hearing thereon any

other creditor of the defendant or other party in interest may

be heard” (R. 184).

On September 6, 1932, the Manhattan Railway Company

intervened in the proceeding and on its petition (R. 248)

William Roberts was appointed a temporary Receiver of the

Manhattan Railway Company (R. 196). The order for his

appointment also provided that cause should be shown on

the 22nd day of September, 1932, as to why that receivership

should not be made permanent (R. 200).

Between August 26, 1932, and Septcinber 22, 1932, there

were numerous interventions in the Brake Shoe suit by com-

mittees of security holders and an intervention by the Trus-

tee of the First (Consolidated) Mortgage of the Manhattan

Railway Company (R. 2, 3).

On September 28, 1932, no objection having been made

thereto, the receivership of the Interborough and the receiver-

ship of the Manhattan were made permanent pendente lite

(R. 225). On that day, The Guaranty Trust Company of

Xew York, as Trustee under the First and Refunding Mort-

gage of the Interborough Rapid Transit Company securing

bonds then outstanding in the hands of the public in a prin-

cipal amount in excess of $132,000,000, was made a party

defendant (R. 226).

The petitioner Johnson did not choose to avail himself of

the opportunity given by the order of August 26, 1982, to

come in on September 22, 1932, in the Brake Shoe suit and

contest the appointment of the Receivers. Instead, on Sep-

tember 21, 1932, he filed his bill of complaint in the United

States Distriet Court against the Manhattan Railway Com-

pany, the Interborough and their respective receivers (R.

7,13). Solely as a stockholder of the Manhattan Railway

Company (Which had already intervened in the Brake Shoe

snit) (R. 196), Johnson asserted the right to sue in behalf

of that company, the interest of that company in the Inter-

horough situation being that the Interborough was a lessee

of all of the property of the Manhattan and was at the time

in default in the payment of certain taxes on the Manhattan

property, that being one of the items of rent under the lease.

As such stockholder of the Manhattan Railway Company,

Johnson attacked the validity of the appointment of tempo-

rary Receivers of the Interborough and of Manhattan made

by Judge Manton, and asked, inter alia, for the appointment

of other receivers (R. 45).

The bill of complaint in the Brake Shoe suit and the an-

ewer therein disclosed that the Interborough was in default

in a substantial manner under its obligations under its afore-

said First and Refunding Mortgage securing bonds outstand-

ing in the hands of the public in the principal amount of more

than $12,000,000, and securing additional bonds in excess of

$54,000,000 pledged as security for its Collateral Notes, that

it was in default to a substantial degree under the terms of

its lease of the elevated railroad of the Manhattan Railway

Company, that it was badly in arrears in payment of taxes

on its own property, that it had due and owing (or would

have due and owing within a few days from the date of the

appointment of the Receivers) indebtedness, which it was

4

absolutely unable to pay, for supply bills, rent under the

Manhattan lease, principal and interest of funded indebted-

ness and past due taxes in an amount in excess of $48,000,000

(R. 164, 165).

As was stated by Judge Learned Hand for the Circuit

Court of Appeals in the opinion below (R. 1028) :

“The controversy does not touch the substantial

relief asked by any of the parties; all acknowledge

that the two railways are in such financial straits that

a court of equity must take over their assets, to pre-

vent their dismemberment by execution, attachment

and the like. The plaintiffs (referring to Johnson and

Bochm), and those who have intervened, ask for re-

ceivers, just as do the parties to the American Brake

Nhoe Company suit. The dispute touches merely who

shall be the receivers, and who the judge to have

charge of the receivership. The question at the outset

is whether the rules deprive the Circuit Judge of juris-

diction to proceed under the order designating him to

hold the District Court.” (Italies ours. )

In making the appointment of temporary Receivers and

subsequently, on September 28, 1932, making their appoint-

ment permanent, Judge Manton acted pursuant to a designa-

tion to hold a District Court of the United States for the

Southern District of New York, dated August 25, 1932 (R.

177). At that time there was also an outstanding effective

designation of Judge Manton to hold a District Court for the

Southern District of New York, dated March 20, 1920 (R.

661. fol. 1983).

On October 13, 1932, Judge Woolsey, in the Johnson suit,

held that by reason of Rules 1l-a* and 1l-a** adopted on

* Rule 1-a reads as follows:

“1-a. Any judge designated to sit in the District Court for tie

Southern District of New York, shall do such work only as may be

assigned to him by the senior district judge.”

** Rule 11-a reads as follows:

“11-a. All applications for the appointment of receivers in equity

causes, in bankruptcy causes and any other causes (except where a

receiver in bankruptcy may be appointed by a referee as provided

in the Bankruptcy Rules) shall be made to the judge assigned to

hold the Bankruptcy and Motion Part of the business of the court

and to no other judge.”

v

ey

-

June 30, 1932, by the cight regularly appointed District

Judges of the United States District Court for the Southern

District of New York (but without the concurrence therein

of the then sitting designated Judges; and of a majority of

the Judges of the Circuit Court of Appeals as required by

Federal Equity Rule No. 79 [R. 713, fol. 2139]), Judge Man-

ton was entirely without jurisdiction to appoint Receivers,

and that his appointment and all orders made by him in the

Brake Shoe suit were absolutely null and void (R. 694).

On October 18, 1932, Judge Woolsey, solely on his own

motion, and for the sole purpose of providing an alleged legal

basis for entering an order in another suit (the Brake Shoe

suit) over which he had no jurisdiction, entered an order con-

solidating the Johnson suit and the Brake Shoe suit into one

suit under the title of “In the Matter of the Interborough-

Manhattan Receivership Proceedings,” and having made and

filed said order of consolidation, he then entered an order in

the said consolidated proceeding vacating all of the orders

made by Judge Manton in the Brake Shoe suit. Judge Wool-

sey stated as his reason for consolidating the two cases (R.

710, fol. 2130) :

“There is in my mind a residuum of doubt

whether, so long as they remain separate Causes, an

order could properly be made in the Johnson case,

Equity No. 71-153, which would affect the receivership

orders and the other orders made in the American

Brake Shoe & Foundry Company case, Equity No.

70-364.”

The Circuit Court of Appeals held that the order of con-

solidation was erroneous and reversed the same (R. 1034).

Neither Johnson nor Boehm in their petitions for a writ

of certiorari raise any question as to the propriety of the

decision of the Cirenit Court of Appeals on this point. Ac-

cordingly, with the Order of Consolidation admittedly erro-

neous and out of the way, petitioner Johnson has no status

whatsoever in the Brake Shoe suit, but only as a plaintiff in

his own suit, and the petitioner Boehm has no status except

as an intervenor therein.

—

Eero: - “ig

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,.

6

As stated by the Circuit Court of Appeals in its opinion,

the sole question presented to Judge Woolsey and presented

to the Cireuit Court of Appeals was the “limited issue

whether the rules, assuming that they are valid, go to the

jurisdiction of the judge” (R. 1029). Judge Woolsey held

that the two rules absolutely deprived Judge Manton of the

jurisdiction he otherwise would have had by virtue of his

designation to hold a District Court. The Circuit Court of

Appeals held that the rules, at most, were merely directory

and that the failure to observe the same did not and could

not deprive Judge Manton of jurisdiction.

On account of the vast interests involved, both publie and

private, and of the critical conditions requiring prompt ac-

tion for the protection of said interests, appeals from said

orders, and from an earlier order granting the petitioner

herein leave to file his bill (R. 7), were promptly perfected

und brought on for hearing before the Circuit Court of Ap-

peals on November 14, 1932.) On December 7, 1932, that

Court handed down its opinion reversing all three orders

appealed from and formal orders were entered on December

14, 1952 (R. 1086). Due to the delays arising from peti-

tioner’s motion to amend the opinion of the Circuit Court of

Appeals so as to free him from costs, the final order for man-

date was entered on December 29, 1952 (R. L047).

However, despite the emergency conditions and the great

and complicated interests involved, which the petitioner him-

self sets forth in his bill of complaint (R. 22, 23, 26-30, 34-39),

his petition for certiorari was not filed in this Court until

February 17, 1953, or served on respondents until February

20, 19335. ;

It is obvious, of course, that in a receivership of a great

property the situation does not remain static. Many things

have necessarily occurred in the administration of the re-

ceivership (involving the expenditure of millions of dollars)

since Judge Woolsey’s order of October 18, 1982, which have

materially altered the situation, and make impossible the

restoration of the status quo of August 26, 1932, and which.

we believe, should be called to the attention of the Court,

od

‘

although—while of record in the Brake Shoe suit—they are

not in the record before the Supreme Court on this petition.

We mention some of the more important in a note at the

end of this brief (p. 19, infra).

There is no foundation in the record for the statement

contained on page 3 of the Petition that “a simple contract

creditor, with the consent of Interborough and Manhattan,

two railroad corporations, obtained the appointment of

friendly receivers for both corporations, in spite of the warn-

ing of this Court against such practices” in Harkin Vv. Brun-

daye, 276 U.S. 36, and Michigan v. Michigan Trust Co,, 286

U.S. 534.

There is absolutely nothing in the record to sustain, or,

indeed, any basis of fact to justify, in any aspect thereof,

the statement found on page 3 of the Petition that “The New

York Bar, and the Judges of the District Court, cannot

understand the repeated flouting of the etfective rules govern-

ing equity receiverships in this district.”

Summary of Argument.

1. It was not necessary for the Circuit Court of Appeals

to make any determination as to the validity or effect of the

Division of Business Order in order to sustain the validity

of the orders appointing receivers made by Judge Manton

[Answering Petitioner Johnson’s Point 1 (a)].

2. The finding in the Order of Designation that the public

interest required the designation is conclusive upon the

Court and litigants [Answering Petitioner Johnson’s Point

I (b) and (c) and Boehm’s Point II].

3. Rules l-a and 1l-a were at most directory and the

failure to observe the same did not deprive Judge Manton

of jurisdiction [Answering Petitioner Johnson’s Point II].

4. The petitioner could have made all of his objections

to the receivership on the return day (September 22, 1932)

of the order to show cause respecting the appointment of

temporary Receivers without intervention in the Brake Shoe

| ceteiiaeeeiaiiih aati ae eae

g

suit and without the necessity of filing an independent suit

such as the Johnson suit [Answering Petitioner Johnson’s

Point III].

5. None of the matters presented in Point IV (Petitioner’s

Brief, p. 21) were considered before Judge Woolsey or

passed upon by him or considered or passed upon by the

Circuit Court of Appeals, and they are not involved in this

petition [Answering Petitioner Johnson’s Point IV].

POINT ONE.

| ANSWERING PETITIONER JOHNSON’S POINT TI,

SUBDIVISION (2). ]

It was not necessary for the Circuit Court of Appeals

to make any determination as to the validity or effect of

the Division of Business Order in order to sustain Judge

Manton’s power to appoint Receivers in the Brake Shoe

suit.

The Cireuit Court of Appeals, in reaching the decision

sought to be reviewed, did not even advert to the Division of

Business Order, and no weight was given to it on behalf of

the respondents-appellants in their argument and briefs be-

fore the Circuit Court of Appeals.

If we assume, for argument’s sake, that the Division of

Business Order was absolutely void, such invalidity in no

way affected the force and effect of the Designation Orders,

and under those orders, we submit, Judge Manton had ample

power to appoint receivers. Obviously, the mere fact ad-

verted to in petitioner’s brief that somebody bound the Desig-

nation Order and the Division of Business Order together

for filing purposes, has no bearing on the situation. Neither

order in any way was dependent upon or referred to the

other.

POINT TWO.

| ANSWERING PETITIONER JouNSON’s POINT I, SUBDIVISIONS

(b) AND (©) AND BoruM’s Point IT]

The finding in the Order of Designation that public

interest required the designation is conclusive upon

the Court and litigants.

(a) Judge Woolsey expressly refused to examine into the

propriety of the Designation Order (R. 698) and the Circuit

Court of Appeals held that it would not examine into the

facts affecting the question of public interest (R. 1052).

The motion of Boehm expressly requested a determination

by Judge Woolsey that the Designation Order and the Divi-

sion of Business Order be vacated and set aside (R. 134).

Judge Woolsey’s order denied this motion “for want of

jurisdiction” (R. 728, 729). No appeal was taken by the

petitioners from this order of denial and the time te appeal

has expired, and, accordingly, we submit that the propriety

of the Order of Designation is not before the Court.

(hb) Obviously, if the validity of the designation made by

the Chief Justice of the United States or by a Circuit Justice

or by the Senior Circuit Judge pursuant to the authority

of Section 22, Title 28, of the United States Code could be

questioned by litigants, either directly or collaterally, on the

ground that the public interest did not, in fact, require the

designation, chaos would result in the administration of jus-

tice in the Federal Courts. Litigants would go before such

a designated Judge at the peril that at any time the whole

proceeding might be held to be entirely void, either in the

suit itself or in some concurrent or subsequent collateral suit,

on the ground that the Judge had been entirely without

jurisdiction, either because of lack of public interest at the

time he was designated, or because the public interest orig:

inally justifying the designation had ceased to exist at the

time of the actual proceeding before him.

Qype re *

10

Even assuming, for argument’s sake, that the question as

to whether, in fact, public interest justified his designation

might be raised by a litigant involved in a proceeding being

heard before a designated Judge, the question certainly can-

not be determined and the whole proceeding before the desig-

nated Judge set at naught upon a mere ex parte assertion

that no such public interest existed, made in a collateral

suit. It is solely on the basis of such ex parte assertions

made in the Johnson suit that this Court is asked to de-

termine that there was no public interest sustaining the

Designation Order.

On the merits on the right to question public interest, we

need add nothing to what was said by Judge Learned Hand

for the Circuit Court of Appeals (R. 1082), as follows:

“The vacating decree at bar properly refused to con-

sider the validity of the order of designation of August

twenty-fifth, but the appellees attack it here. They

say that it appears both from the affidavit of Quacken-

bush, and from an opinion of the Circuit Judge in the

American Brake Shoe Company suit, rendered after

the vacating decree, that the only public interest sup-

porting it was the fear that a trust company might be

appointed receiver; and that this is not the kind of

interest contemplated by the statute. Even so, the

order conferred the statutory authority upon the

designated judge. The power to designate, granted

by 28 U.S. C. A. Sec. 22, is plainly administrative,

and parties are not subject to the peril that every-

thing decided may be upset, unless they can satisfy

another court that there was adequate occasion for its

exercise. The situation is the same as in People ex rel.

Saranae Land & Timber Co. y. Extraordinary Special

& Trial Term of Supreme Court, 220 N. Y. 487, 116

N. E. 384, for it does not matter that the condition is

the ‘public interest,’ rather than the appointing judge's

‘judgment’ of that interest. Section 22 was indeed

originally the same as sections 17, 20 and 21 in this

regard (28 U.S. C. A. sees. 17, 20, 21), but the section

was recast generally in 1922 (42 Stat. 689 [28 U. 8.

(. A. sec. 22]), and the failure to retain the original |

phrase was certainly not intended to have such far-

reaching consequences. It cannot be that the act of the

11

Chief Justice, for example, or of a Circuit Justice, is to

be subjected to a scrutiny when designating a Circuit

Judge, to which it is not open in the case of a District

Judge. The power can indeed be abused, but the

remedy may be worse than the evil; it is not to the

courts that the public must look for correction.”

See United States v. Gill, 292 Fed. 136 (C.C. A. 4th,

1923).

Point Tl made by Boehm in her brief has, we submit,

no merit. The public interest involved warranting a designa-

tion by the Chief Justice or a Cireuit Justice or the Senior

Circuit Judge may obviously attach to a particular case.

The making of designations for the trial of a particular case

ora class of cases has been a uniform practice (R. 554, 555,

655, 659, 660, 661, 662). The right to do so was approved in

United Ntates v. Gill, 292 Fed. 136 (C. C. A. 4th, 1925).

POINT THREE.

| ANSWERING PETITIONER -JOHNSON’S POINT I1.]

Rules l-a and 1l-a were at most directory and the

failure to observe the same did not deprive Judge

Manton of jurisdiction.

So-called Rules 1-a and 11-a were ineffective to deprive a

designated Judge of jurisdiction and to render his acts coram

non judice.

The petitioner Johnson has now apparently abandoned

Rule lea, which provided in effect that a designated Judge

could do “such work only” as the Senior District Judge

permitted. Bochm, in her brief, gives no real support to

Rule l-a.

Rule 11-a merely directs where applications for the ap-

pointment of receivers shall be made, i. e., “to the judge as-

signed to hold the Bankruptcy and Motion Part of the busi-

ness of the court and to no other judge,” i. e., whether he be a

designated Judge or a District Judge.

12

The petitioner claims that the rule was made under the

authority of a specific statute, to wit, Section 23 of the Ju-

dicial Code (Sec. 27, Title 28 df the United States Code)

(Petitioner’s Brief, p. 19). This section provides that, ~In

districts having more than one district judge, the judges

may agree upon the division of business and the assignment

of cases for trial in said district; * * *.”

Obviously, this statute has no bearing whatsoever on Rule

Il-a. A rule which requires a litigant to make his appliea-

tion for a receiver to the Judge sitting in the Motion Part,

has no relation whatsoever to the division of business he-

tween the individual Judges. An agreement as to the divi-

sion of business among the Judges is an arrangement by

which they determine from day to day, or week to week, as

to what individual Judge shall actually sit on a particular

day in the Motion Part, as well as in the other parts of the

Court. Obviously, notwithstanding Rule 11-a, disagreements

might frequently arise as to who was actually to sit in the

Motion Part.

If Rules I-a or I 1l-a be more than directory, they are

obviously invalid.

Section 731, Title 28 of the United States Code is the sole

source of power of the District Court to make rules. It

provides as follows:

“See. 731. Rules of practice in district courts. The

district courts may, from time to time, and in any

manner not inconsistent with any law of the United

States, or with any rule prescribed by the Supreme

Court under section 730 of this title, make rules and

orders directing the returning of writs and processes,

the filing of pleadings, the taking of rules, the enter-

ing and making up of judgments by default, and other

matters in vacation, and otherwise regulate their own

practice as may be necessary or convenient for the

advancement of justice and the prevention of delays

in proceedings.”

Rules ta and Ila are jevalid because, contrary to the

provisions of this statute, (#9) they are inconsistent with

-

13

many laws of the United States, (b) they are inconsistent

with rules prescribed by the Supreme Court, (¢) they are

not necessary or convenient for the advancement of justice

and the prevention of delays in proceedings, but will have

the contrary result, and (d) they are not rules of practice,

but alleged rules of jurisdiction.

(a) Rules l-a and 11-a are inconsistent with Section 13,

Title 28 of the United States Code (See. 9 of the Judicial

Code), which provides that District Courts as courts of equity

“shall be deemed always open,” and “any district judge

may, upon reasonable notice to the parties, make, direct,

and award, at chambers or in the clerk’s office, and in

vacation as well as in term, all such process, commissions,

orders, rules, and other proceedings, whenever the same are

not grantable of course, according to the rules and practice

of the court.” (Italies ours.)

Furthermore, under Section 22 of Title 28 of the United

States Code (Sec. 18 of the Judicial Code), a Circuit Judge

designated to hold a District Court by the Chief Justice of

the United States, the Circuit. Justice of any circuit, or the

Senior Circuit Judge thereof, “shall have all the powers and

rights and perform all the duties of a judge of the district,”

excepting only “the power of appointment to a statutory

position or of permanent designation of a newspaper or de-

pository of funds,” and by Section 23 of said title (Sec. 19

of the Judicial Code) it is made his duty to discharge all

the judicial duties for which he is so appointed; and “all

the acts and proceedings in the courts held by him, or by or

before him, in pursuance of said provisions, shall have the

same effect and validity as if done by or before the district

judge of the said district.”

With respect to the powers of a Judge so assigned, this

Court said, in Ex parte United States (226 U.S 420, 493):

“Jt is moreover beyond question that the statutes

while contemplating as a general rule the holding of

District Courts by district judges and as a general

rule for holding Circuit Courts of Appeal by circuit

judges, nevertheless expressly directs when the occa-

14

sion requires (Sec. 18) the assignment by the senior

judge, or the circuit justice, or the Chief Justice of a

cirenit judge to hold a District Court and endows ;¢

judge so assigned with all the authority of a district

judge (Sec. 19), giving power in case of such desig-

nation to hold separately at the same time a District

Court in such district, and to discharge all the judicial

duties of the district judge therein (Sec. 14). The

statute therefore clearly gives to the circuit judges the

rights and powers of judges of the new District Courts,

and calls such powers into play when assigned accord-

ing to law.” (References in above quotation are to

sections of Judicial Code.)

There are numerous other laws of the United States with

which Rules leaiand Tl-a are also inconsistent, as, e. g.,

Sections 17, 18 and 23. Title 28. United States Code.

(hy Rules leacund ll-a are inconsistent with Rule 6 of the

Federal Equity Rules, which provides that

“The judge may at any time and place, and on

such notice, if any, as he may consider reasonable,

make and direct all interlocutory orders, rulings and

proceedings, advancement, conduct and hearing of

causes.” (Italics ours. )

Furthermore, Rule Il-a in terms purports to regulate

the practice “in equity causes,” but it did not receive the

concurrence of a majority of the Circuit Judges (R. 713,

fol. 2139), as Federal Equity Rule 79 requires.

The Circuit Court of Appeals did not find it necessary to

pass on the validity of said so-called Rules 1l-a and 11-a, be-

cause it held that in any case they did not have the effect of

depriving a designated Judge of the jurisdiction vested in

him by the statute and that any question as to the violation

of said rules could not be raised in the manner the petitioner

has attempted to raise it.

We deem it unnecessary to add to the cogent reasons of

Judge Learned Iland in support of that view (R. LO2S ef

seq.).

ig

15

POINT FOUR.

| ANSWERING PETITIONER JOHNSON’S POINT ITT.]

The petitioner could have made all of his objections

to the receivership on the return day (September 22,

1932) of the order to show cause respecting the ap-

pointment of temporary Receivers without intervention

in the Brake Shoe suit and without the necessity of filing

an independent suit such as the Johnson suit.

The Circuit Court of Appeals did not hold “that petitioner

could attack Judge Manton’s orders only by intervention in

the Brake Shoe ease,” as is stated in Johnson's brief (p. 20).

It held that the petitioner could not collaterally attack

said orders.

It held that on the return of the rule nisi in the order

appointing temporary Receivers, the petitioner could have

appeared, as he was expressly invited by the order to do,

and could have asked that the cause be transferred to another

Judge and that other Receivers be appointed, and that his

appeal from the denial of his request would have been enter-

tained by the Circuit Court of Appeals (R. 1033).

Equity Rule 37 does not purport to prevent, and did not

in fact prevent, the petitioner as a creditor from appearing

on September 22, 1932, the return day of the temporary order,

either specially or generally, and challenging the jurisdiction

or opposing the continuance of the receivership.

The temporary order appointing Receivers provided—

“upon the hearing thereon any other creditor of the

defendant or any other party in interest may be heard”

(Vol. II, p. 62).

Under the practice followed by the Circuit Court of Ap-

peals for the Second Circuit, the petitioner could have filed

a special appearance, without intervention, for the purpose

of moving to vacate the receivership on all the grounds set

ry, a |

16

forth in the bill of complaint and motions in the Johnson

suit and could have appealed to the Circuit Court of Appeals

from a denial of his motion and been heard on the merits.

Kingsport Press, Inc. v. Brief English Systems, 54

Fed. (2d) 497.

Christian v. Hoe, luc., decided by Circuit Court of

Appeals, 2nd Circuit, Feb. 20, 1933, not yet re-

ported.

Mitchell vy. Lay, 48 Fed. (2d) 79, 84, 85 (C. C. A,

9th).

Pacific Northwest Packing Co. vy. Allen, 109 Fed.

515 (C. C. A. 9th).

The statement at the bottom of page 16 of Boehm’s brief,

that “The complainants (meaning Johnson and Boehm)

* * * had no notice of the application”—i. e., the order of

August 26, 1932, appointing Interborough Receivers, is, ob-

viously, untrue, for the Johnson complaint which was filed

on September 21, 1932, sets forth all the facts about the

appointment of Interborough Receivers (R. 14). Boehm,

counsel for Lillian Boehm, was also of counsel on the John-

son complaint (R. 48). In fact, both Mr. Louis Boehm,

counsel, and Mr. Charles Franklin appeared before Judge

Manton on behalf of their clients on September 6, 1932 (R.

566).

FON eg BEE SA Me pe ee < . i,

17

POINT FIVE.

| ANSWERING PETITIONER JOTINSON’S Pont TY. ]

None of the matters presented in Point IV (Peti-

tioner’s Brief, p. 21) were considered before Judge

Woolsey or passed upon by him or considered or passed

upon by the Circuit Court of Appeals, and they are not

involved in this petition.

The petitioner did not, either in his bill of complaint, his

petition for the vacation of Judge Manton’s orders or in

argument before Judge Woolsey, attack the orders appoint-

ing temporary Receivers as being “consent decrees” “based

upon a bill of a simple contract creditor.”

The bill will be found at page 13 of the record, the petition

at page 118, and the minutes of the hearing before Judge

Woolsey, which the petitioner insisted on having incorpo-

rated in the record, at page 823.

The petitioner in his bill asked for the appointment of

different receivers and set forth at length the reasons why

such appointment was imperative (R. 35 et seq.).

The charge that the proceeding for the appointment of a

receiver of the Interborough was a “collusive one” to obtain

friendly receivers (Petitioner’s Brief, p. 22)—which charge

was based on ez parte allegations founded on inferences

contained in the Johnson bill of complaint (R. 70, 72, 74,

75, 24, 25, 26)—-was not argued before Judge Woolsey (R.

848, fol. 2543; p. 931, fol. 2793) and was not considered by

the Cireuit Court of Appeals and is not before this Court.

Ny ee ED

BE ert overnce

18

IN CONCLUSION.

The writ of certiorari should be denied.

Respectfully submitted,

NATHAN L. MILLER,

Counsel for Victor J. Dowling and Thomas E.

Murray, Jr., Receivers of the Interborough

Rapid Transit Company.

NATHAN L. MILLER,

WILLIAM W. MILLER,

CHARLES A. Boston,

CARL M. OWEN,

of Counsel.

The undersigned join in the foregoing brief and submit

that the mewn of certiorari should be denied.

unt

CHARLES E. HUGHES, Jr.,

ALLEN 8S. HUBBARD,

Counsel for William Roberts, as Receiver of

Manhattan Railway Company.

On behalf of the respondent Committee for the protection

of the holders of Ten-Year Six Per Cent. Gold Notes, due

October 1, 1952, of Interborough Rapid Transit: Company,

the undersigned concurs in the arguments advanced in the

foregoing brief and submits that the petition for a writ of

certiorari should be denied.

CLOYD LAPORTE,

Counsel for Charles Hayden and others, as

Committee for the protection of the holders

of Ten-Year Six Per Cent. Gold Notes of

Interborough Rapid Transit Company.

all

19

The undersigned joins in the foregoing brief and, in addi-

tion, urges that the damage and injury which would result

to the Bondholders represented by the Protective Committee

named below and to the other creditors of Manhattan Rail-

way Company require that the petition be denied.

PAXTON BLAIR,

Counsel for Van Santvoord, Merle-Smith and

others, as the Protective Committee for Man-

hattan Railway Company Consolidated Mort-

gage Four Per Cent. Gold Bonds, Intervenors

in the suit of The American Brake Shoe and

Foundry Company y. Interborough Rapid

Transit Company, now pending in the Dis-

trict Court of the United States for the

Southern District of New York.

Boykin C. WRIGHT,

of Counsel.

Note.

One of the most urgent matters which the complainant

Johnson set forth in his bill as requiring immediate action

was the payment by the Interborough of the interest on the

$40,683,000 in principal amount of Consolidated Bonds of

the Manhattan Railway Company as an item of rent under

the Manhattan lease which would be due on October 1, 1932

(R. 36). An application of the Interborough Receivers for

instructions with respect to the payment of this rent (R.

329) and a petition of the Manhattan Receiver requesting an

order that this be paid (R. 366) were referred to Basil

O'Connor as Special Master by an order of Judge Manton

made November 7, 1952.

At the hearings before the Special Master, Mr. Charles

Franklin, attorney herein for Johnson suing as a stockholder

in the derivative right of the Manhattan Railway Company,

appeared as attorney for the Manhattan Railway Company

itself, which, as above stated, had intervened in the Brake

Shoe suit on September 6, 1932.

eee. |

20

In this connection it is to be noted that the Johnson bill

was filed on September 21, 1932, and that a substantial por-

tion of the bill is devoted to alleged claims of the Manhattan

against the Interborough and to reasons as to why other

receivers of Manhattan should be appointed (R. 25 et seq.).

On September 24, 1932, a committee of stockholders of the

Manhattan Railway Company, of which Nathan L. Amster

is chairman and Charles Franklin, attorney for the petitioner

Johnson, is a member, and for which Charles Franklin also

acted as attorney, filed a petition of intervention in the

Johnson suit (R. 144, 146), and an order granting said inter-

vention was entered on September 26, 1932 (R. 142). At

the annual stockholders’ meeting of the Manhattan Railway

Company held on November 11, 1932, Mr. Nathan L. Amster

was elected President and Mr. Franklin was chosen as Gen-

eral Counsel, since which date Mr. Franklin has appeared

at all of the proceedings in the Interborough Receivership in

the Brake Shoe suit on behalf of the Manhattan Railway

Company, and he was formally substituted as solicitor there-

for on January 21, 1935. On December 7, 1932, Mar. Frank-

lin, as attorney for the Manhattan Railway Company, made

u motion in the Brake Shoe suit for the appointment of Mr.

Amster as Receiver of the Manhattan Railway Company in

place of Mr. Roberts, and the questions raised by this motion

have been referred to the Special Master. We believe it is

a fair inference from the record that the Johnson suit was

brought only in the name of Johnson as a citizen of Kentucky

in order to confer jurisdiction on the Federal Court, that

the real plaintiff was Nathan L. Amster, and that Nathan

L. Amster having become the [resident of the Manhattan

Railway Company, and a Board of Directors thereof largely

chosen by him having been put into office, the ostensible

reason for a derivative suit has disappeared.

On November 30, 1932, Judge Manton ordered the pay-

ment by the Interborough Receivers of the interest then past

due on the Consolidated Mortgage Bonds of the Manhattan

Railway Company, involving an outlay on the part of the

Receivers of approximately $817,000.

Saabs Stele" LE MM Oe LMAO NA OR

» | t

-

On November 17, 1932, the Chase National Bank of New

York, as Trustee of the Second Mortgage of the Manhattan

Railway Company, intervened and filed a bill to protect its

rights as Trustee of the mortgage securing said bonds; re-

questing an impounding of income.

On December 20, 1932, an order was entered directing

that all claims and demands against the Interborough Rapid

Transit Company should be presented to the Receivers with-

in three months from the date thereof, and providing that

all claims and demands not presented within said period of

three months should be barred from sharing in the benefits

of the distribution of the proceeds of the properties of the

Interborough Rapid Transit Company, pursuant to which

order advertisement of the terms thereof has been made in

newspapers specified in said order and many claims have

heen presented and approved pursuant thereto.

On December 21, 1932, Judge Manton ordered the pay-

ment by the Interborough Receivers of the interest due De-

cember 1, 1932, on the Second Mortgage Bonds of the Man-

hattan Railway Company.

On December 21, 1932, the Interborough Receivers were

ordered to pay certain taxes on the property of the Inter-

borough Rapid Transit Company, amounting to approxi-

mately $557,000, some of which have been past due since

1928.

On December 21, 1932, the Interborough Receivers were

directed to pay the interest and sinking fund due and pay-

able on January 1, 1933, on all of the outstanding First and

Refunding 5% Gold Bonds of the Interborough Rapid Tran-

sit Company, which involved a cash outlay of approximately

$6,282,000. This outlay has subsequently been made by the

Receivers pursuant to this order and in addition transfers

of securities to meet the terms of the sinking fund have been

made pursuant to the authority of said order.

On December 24, 1932, Arthur W. Loasby and others, as

a Committee for the Stock and Voting Trust Certificates for

Stock of the Interborough Rapid Transit Company, inter-

vened,

22

On December 29, 1982, Judge Manton ordered the pay-

ment by the Interborough Receivers of past due taxes on the

property of the Manhattan Railway Company amounting to

approximately $817,000, and said taxes have subsequently

been paid.

In addition, the Receivers have modified a number of

contracts of the Interborough and have disaftirmed others;

among others, they have obtained a substantial modification

of the contract affecting wages.

Rat STAIRS thay RI SIPARA e ILRE * SO T CINTES Tie SA N RRI Pre

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eG a4. hs PR awa ea ee ee re

Point I—Judge Manton was duly empowered to hold

a District Court with all the rights, powers and

duties of a District Judge........... 0... cc cee ee

(a) Historical background of designations of Cir-

cenit Judges to hold District Courts. .......

(b) The existence of public interest justifying the

designation cannot be inquired into.......

(c) The designation could not be attacked col-

laterally for want of public interest.......

(d) It is inconceivable that the fact of publie

interest can be inquired into, but, in any

event, inquiry must necessarily be made in

some procedure adequate for the purpose. .

(e) Designations of Circuit Judges to sit in a par-

thewlar CASE APC PORE 66k ssc sdeeccneces

(f) The uniform and general practice since the

adoption of the Judicial Code in 1911, of

the Senior Circuit Judges in designating

themselves and in making both general

standing designations and Cesignations for

a particular case, should put the question

iliiaimeien. |

2

PAGE

TOE PIP IB ae Hint e020 ° we: . — “ik —

PAGE

(g) Asa properly designated Judge either under

his standing designation of March 20, 1930,

or under his designation of August 25, 1932,

Judge Manton had all the rights, powers

and duties of a District Judge............ 36

Point II—The District Judges were without power to

deprive designated Judges, whether Circuit Judges

or District Judges, of the authority and jurisdiction

vested in them by the statute.................... 38

Point I1I—So-ealled Rules 1-a and 11-1 adopted by the

District Judges are invalid...................... 42

(a) Rules lea and 1l-a were not adopted in ac-

cordance with the requirements of the

Es BRN ek ake ee Re ie eh eens 43

(b) The so-called rules are not rules of practice... 45

(c) The two rules do not meet the requirement

of Section 731 that they be “not inconsist-

ent with any law of the United States or

with any rule prescribed by the Supreme

Court under Section 730°. ............... 46

(d) The two rules are not authorized by Section

27, Title 28, of the United States Code.... 47

at,

Pornt IV—Rules 1-a and 11-a, even if valid, do not

have the effect of depriving a Judge of the jurisdic-

tion conferred upon him by the statute, whether he

be a Judge de jure or de facto. ......... cece eecees 51

PornT V—The orders made by Judge Manton in the

Brake Shoe suit were not subject to collateral at-

ae CRACKS RARER SRN RO RNR Oe eee 6 53

Point VI—The petitioners’ specifications of error do

not refer to the reversal of Judge Woolsey’s order

consolidating the Johnson suit and the Brake Shoe

suit. Said order was unauthorized, and in any case

the two suits remained distinct despite it..........

Point VII—The petitioners have no standing in an

independent suit either to apply for the appointment

of receivers of the Interborough or to attack the

orders appointing such receivers... ........6.00006-

Pont VITI—The question as to the power of the Court

to appoint receivers at the suit of a simple contract

creditor on the consent of the defendant and the

question as to whether the Brake Shoe suit was col-

lusive are separate and distinct questions. Neither

in presented by the record. ........ccessscccsess °

Pont IX—The Johnson suit was not a direct attack.

Point X—The rights of the intervenors have become

paramount, Seer Aa eine ye ae ae IE ee euewe

Ix CONCLUSION: Point XI—The decree of the Circuit

Court of Appeals should be affirmed..............

PAGE

DS

61

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a |

TABLE OF CASES CITED.

PAGE

Abbott v. Brown, 241 U. 8. G66 (1016)... 0... ccnces 52

Ackerson v. United States, 15 Fed. (2d) 268 (C. CLA,

Se, Ss 5 CORTE ie a eR OA ea 3%)

Adler v. Seaman, 266 Fed. 828 (@. C. A. 8th, 1920) .59, 60

American Steel Barrel Co., Ex parte, 230 UL 8. 35....29, 57

Argus Co., Matter of Petition of, 138 N.Y. 557...... 53

Ball v. United States, 140 U.S. 118 (1891).......... D4

Black & W. T. & T. Co. v. Brown & Y. T. & T. Co., 276

Ri COREE ee ne ah re ee 6S

Blair v. City of Chicago, 201 U.S, 400, 448 (1906).... 0° GS

Bradley v. Van Nostrand, 189 Cal. 457; 208 Pac. 690

Le, RE Ptr er pay eee ar wren rn Rg a

Brewster v. Gage, 280 U. 8. 327, 337 (1980).......... 36

Brown v. Lake Superior Iron Co., 134 USS. 530 (1890). 68

Coase ¥. Emmet, Be Wa. GOR iss iden cece sccnsscs 57

Case v. United States, 14 F. (2d) 510 (C. C. A. Sth,

FPS ee eS Per eee Pr Are eer rere re eee a8

Christian v. Hoe, Inc., 63 Fed. (2d) 218 (CLC. A. 2nd). 55

Copper Queen Mining Co. vy. Arizona Board, 206 U.S.

BER BO RE oes ba eh oe Sai ae oO AOE ES 36

Davidson Marble Co, y. Gibson, 213 U.S. 10 (1909)... 41

Dickerman v. Northern Trust Co., 176 U.S. 1S1 (1900) GS

Foley vy. Utterback, 196 Iowa 956, 195 N. W. 721, 722.0 58

Forest Oil Co, v. Crawford, 101 Fed. 849 (C. CL. A, 8rd,

2: Sar ree ra. 8 eo ee rr eae ene 62

Gaddis v. Junker, 27 Fed. (2d) 156 (D. C., E. D. Tex.) 62

General Electric Co. vy. Marvel Co., 287 U.S. 4380, 484

CRE ooo oc carne ee eee ks eer ee Ch ener ee 41

CAPE ©; GA, SOO Us Wi es occa Coe kus teekeenaa’s 57

Harkin v. Brundage, 276 U.S. 36 (1928) ............. 65, 67

Heald v. District of Columbia, 254 U.S. 20, 23 (1920). 36

vi

PAGH

Ilefner vy. Northwestern Life Ins. Co., 128 U. 8. 747,

CR ae ee Ee a yr oe Re eT oe 6S

Hollins y. Brierfield Coal & Iron Co., 150 UL 8. 371, 380

SEES i ak SERS p int ba awe behest te bed 60uad Oa ee aes (Gs

Ilorn y. Pere Marquette, 151 Ped. 626 (1907)........ 3o

Hudson v. Parker, 156 U. 8. 277 (1805).............. 40)

Kingsport Press v. Brief English Systems, 54 Fed. (2d)

Se ERy TA Us ED a ccd bask ys dome b in ees sovieseess 55

Lawrason vy. Swartz, 132 La. 511, G1 So. Rep. 554 (La.,

SC Cht- skh anne bad CeCCeC eee CsA rhenete eases 28

eas V. Seemnnt, Se Was. FE onc ccdccesvecsvecs 57

MeCaughn v. Hershey Chocolate Co., 288 U.S. 488,

ET win on 60064 0:s 3 Re ees baer ae eens dees 36

McDoweil v. United States, 159 U.S. 596 (1895)....0 °°

McGowan y. Parish, 237 U. 8S, 285, 295 (1915)....... GS

Metropolitan Ry. Receivership, 208 U. Ss. 90, 110

(1908).. oe odipeetaenh sedate seen 6, 67, 68

Mitchell v. iow, “48 Ped. (2d) Mes iWeussracsas tekares 55

Michigan v. Michigan Trust Co., 286 U.S. 38384 (1932 65

Mueller vy. Adler, 292 Fed. 138 (C. C, i Sth, anes. 59

Nolte vy. Hudson Navigation Co., 11 FL (2d) 680, GS2

OR eis ED CS heb bcc ceceseave eases beens 60

Old Colony KR. Co, vy, Commissioner, 284 U. 8, 552, 557

ENA A See eer rere tt eee re ere TT e 6

Pacific Northwest Packing Co. v. Allen, 109 Fed. 515

te Ee) Fy err Te TT eee eee Te ey Teer DD

Penn Steel Co. v. New York City Py. Co., 221 Fed. 440

NE ne dicta WiC Aen hid Oa eb thes whine eee wae 24

People v. Ballard, 134 N. ¥. 260, 203. ......cscccenees 30, 32

People vy. Barbera, 78 Cal. App. 277, 248 Pac. 304.... 0 53

People ex rel, 8S. L. & T. Co. vy. Supreme Court, 220

ee eet eer re Pen eer eee 30

Ix parte Poultney y. City of La Fayette, 12 Peters 472

CRD sv <A bon eleh 42's 665040 4d eR Cease waeae 52

Price y. United States, 269 U. S. 492 ore eceeenes 68

Pusey & Jones Co. v. Hanssen, hon U.S. 491 (19238) .62, 65, 67

se

a ae

vii

PAGE

Rio Grande Irrigation Co, y. Gildersleeve, 174 U.S.

Oe GE. Ul re ie eam Sn hoa ee ee D1

Robertson v. Downing, 127 U.S. G07, G13 (IS88)...... 3

Santiago v. Nogueras, 214 U. 8. 260, 267, 268...... 57

Shapire v. Wilgus, 287 U.S. 348, 356 (1982). .....66. G7

State vy. District Court of Lewis and Clark County, 49

Mont. 158, 141 Pac. 151, 152..........eeeeceeoees Be

State v. Leib, 17 N. M. 270, 125 Pac. GOL, G02 knees 3

State v. Lichtenberg, 4 Wash. 553, 30 Pac. 659, 660.... 0 53

Stripe v. United States, 269 U.S. 508 (1926) .......66. 6s

Stuart v. Laird, 1 Cranch, 209 (T8038) ..........000 6 18, 333

Taylor vy. Logan Trust Co., 289 Fed. 51 (0G. (. A. Sth,

ht a ne cece tare eer ie es hee See Oe a ea ae 60

Toledo ete. RL R. Co. y. Continental Trust Co., 95 Fed.

107 (CC. A. Gta, LBBB). nc cccescvcscesvsesnecens 60

United States vy. Breitling, 20 How, 252 (1857) ....-.- 52

United States v. Butterworth-Judson Corp. 269 U. 8

BA CURBS) ccc cc ewes bn tn knees stines caeenueseses 67, 6S

United States v. California — 279 U. 8S. 5538... ay)

United States v. Falk, 204 U.S. 148, 152 (1907) ..... 34, 36

United States v. Gill, 202 bed. 136 (CC. A, 4th, 1923) .24, 33

United States vy. Hermanos vy Compania, 209 0. 8. 357,

339 COBY ooo ob anneneey a tees aber sed scceae a nse er

United States, Ex parte, 226 U.S. 420.0... eee eee a7

Vapor Car Heating Co, vy. Gold Car Heating Co., 296

Fed. 201...... iekceda Kew ceeN aus erences eenaewes 60

Venner v. Great Northern Railway, 209 U.S. 24,55... 41

Ward, Henry, Ex parte, 178 UL 8. 452 CIS99) 2 oA

Washington-Southern Co, y. Baltimore Co., 265 U. 8.

G29, GIB (WDZA). weer reece verreeervecenceecce 40

Weil v. Neary, 278 U.S. 160 (1929). ees 52

Woodbury vy. Jergens Co., 61 Fed. (2d) 736 (0, C. A.

Pnd, 1082)... ccccccvcsccncsssvccssvesessccevess 52

me SE ORT ee NEP RS

TABLE OF STATUTES CITED.

PAGES

Act of Congress, March 3, 1891 (26 St. at L. 826, Sess.

Eg ere er ier eae mar ore 18

United States Code, Tithe 2S:

Section 18 (Judicial Code, Sec. 9)........... 58, 40, 46

Section 17 (Judicial Code, See. 13). .19, 29, 88, 34, 47, 54

Section 18 (Judicial Code, Sec. 14)..... .. 19, 34, 47, 49

Section 19 (Judicial Code, See, 15)... .. 2.19, 38, 84,5

Section 20 (Judicial Code, Sec. 16)... 2. .....19, 33, 34

Section 21 (Judicial Code, Sec. 17)... 2 .......19, 34, 54

Section 22 Judicial Code, Sec. 18). . .19, 20, 22, 23, 24, 3:

34, 35, 36, 37, 38, 40, 41, 46, 49, 51, 54

Section 23 (Judicial Code, Sec. 19)........338, 37, 38, 40

46, 49, 50, 54

Section 24 (Judicial Code, See, 20).........6. 19, 33, 40

Section 25 (Judicial Code, Sec, 21)........... 19, 29, 33

| RE a einai nn Ber gaye 47, 48, 49, 50,51

i ska ob 0d Fh OEM CORR ORETES TAR Ree 47

EOE Sb cae d ke cue rh cade cds ees eu etre eeee 45

IE nb 0 64046 A 4a ee kee we ee beeen howe ke Ath

Section 214 (Judicial Code, See, 201) ............ 44

NLS 6 04k CARR GAR ERM ORME NER CEDAR CORES 48

Sections 375, 376, 878, 387, 452, 647, 739, T76...... 47

Section 730 (Revised Statutes, Sec. 917)......... 43, 46

GN IR 6 sieicne das Rnedd HOR SRK ROS 42, 44, 45, 46, 47

PN CEN Gish b doo Chive Cae ER Oe een en eis 5S

United States Code, Title 18:

oie hy 3 ee ae MORE ach eas Se Agee ee Re RP APRA EN ettus hie 47

TABLE OF FEDERAL COURT RULES CITED.

PAGES

Equity Rules of Supreme Court:

2S errr rr re rte Tere rT eee e rT Tere Ok

4 er Pere Tere Ter ee Te 6? Ue lh CC

NG SR 6 04 N AORN CEA SS URRRER ESKER URES a

8 ee err erm ff

Rules of Distriet Court, Southern District of New

York:

Rule L-a. 11, 12, 14, 52, 58, 40, 41, 42, 43, 45, 47, 48, 51, 69

Rule Ll-a....11, 12, 14, 52, 40, 41, 42, 45, 45, 47, 48,51, 69

TABLE OF NEW YORK STATE LAWS.

{

General Corporation Law : :

‘i

eg ee ree er eer rere 66

ce PE rere Ss erry er ee Pee 66

RECORDS CITED.

Congressional Record, Vol. 45:

Part S, pp. 3547, 3089, 4000... nc ccc ccc censs 22

Congressional Record, Vol. 46:

ite SG UO | Ar errrrrrreerers Tyrer ery e

Pere S, OO. SEDO, BESO... os csc awesacescdessesecn 20, 25

Pare 4, DW. SATO... wc ncswccssecessccvesessvesens 20

Part 4, pp. 4001, 4003, 4004, 4006................... 20, 21

5 fe | | Aer erTerer rr err Tree re Trt ts 23

Congressional Record, Vol, 62:

PET, De FB 6x on caw cavcwesewsnvictsciweetees 34

eee eee etre Te eee 34

ig eR ks err er ere 3D

POE, Oh. Wee ein hv es cane as seas dives ewewes 36

IN THE

Supreme Court of the United States

OCTOBER TERM, 1982.

No. 711 AND No. 721.

BENJAMIN F, JOHNSON,

Petitioner,

against

MANHATTAN RAILWAY COMPANY, et al.,

Respondents.

THE AMERICAN BRAKE SHOE AND FOUNDRY

COMPANY,

Respondent,

against

INTERBOROUGH RAPID TRANSIT COMPANY,

Respondent.

IN THE MATTER

OF THE

INTERBOROUGH-MANHATTAN RECEIVERSHIP

PROCEEDINGS.

BRIEF ON BEHALF OF VICTOR J. DOWLING AND THOMAS E.

MURRAY, JR., RECEIVERS OF INTERBOROUGH RAPID

TRANSIT COMPANY, RESPONDENTS.

ALSO ON BEHALF OF RESPONDENT COMMITTEE FOR THE PRO-

TECTION OF THE HOLDERS OF TEN-YEAR SIX PER CENT.

GOLD NOTES DUE OCTOBER 1, 1932, OF INTER-

BOROUGH RAPID TRANSIT COMPANY.

This Court has separately allowed applications of the peti-

tioner Johnson, the plaintiff in the suit of Benjamin F. John-

son V. Manhattan Railway Company, and others, and of the

petitioner Boehm, intervenor in that suit, for certiorari to

the Circuit Court of Appeals for the Second Circuit to review

the decision of that Court (R. 775) reversing the order

of Judge Woolsey made on October 18, 1932, which vacated

as coram non judice an interlocutory order of Judge Manton,

as a Circuit Judge designated to hold a District Court for

the Southern District of New York, appointing temporary

receivers of the Interborough Rapid Transit Company in the

suit of the American Brake Shoe and Foundry Company y.

Interborough Rapid Transit Company, and a score or more

of other interlocutory orders made in the course of the admin-

istration of said receivership (R. 725-729)—the “Vacating

Order.”

The Circuit Court of Appeals also reversed an order of

the District Court made on September 20, 1932, in the Johu-

son suit granting the complainant leave to file his bill against

the Lnterborough Rapid Transit Company and the Manhattan

Railway Company and their Receivers, and an order made

by Judge Woolsey on the Court’s own motion on October 18,

1932, consolidating the Johxuson suit and the American Brake

Shoe suit under the third title above (R. 775, 722).

In the petitions for certiorari, petitioners complained solely

of the reversal of Judge Woolsey’s “Vacating Order” of Octo-

ber 18, 1932.

The motions of both the plaintiff Johnson and the inter-

venor Boehm before Judge Woolsey prayed for an order

vacating and setting aside the order of Judge Manton, dated

August 25, 1952, designating himself to hold a District Court,

and also the order of Judge Manton, dated August 25, 1932,

designating himself to hear an application for the appoint-

ment of Receivers (the Division of Business Order) (R. 115,

fols. 344, 345, and R. 131, fols. 392, 393). Judge Woolsey

denied the motions of Johnson and Boehm in so far as they

sought to vacate the Designation Order and the Division of

Business Order (R. 728-729). No appeal to the Circuit Court

of Appeals was taken by Johnson or Boehm from this denial.

Petitioners have filed separate briefs. We shall answer

both in one.

Statement of Facts.

The Interborough Rapid Transit Company is a New York

corporation. On August 26, 1932, its capitalization consisted

substantially of the following:

First and Refunding Mortgage 5% Gold

Bonds (secured by a mortgage to the

Guaranty Trust Company of New York)

outstanding in the hands of the public

CUE Lacie Usebenesennsase si $132.000,000.00

Ten-Year Secured Convertible 7% Gold

Notes secured by a pledge to the Bankers

Trust Company, Trustee, of approxi-

mately $54,000,000 in principal amount of

the above-mentioned First and Refunding

PE GE SN ars chetncescnsveccescs 31,672,100.00

These Notes matured on September 1, 1932,

and the Interborough was without funds

with which to pay the same or to pay an

instalment of interest due on that date of. 1.108,523.50

(R. 165)

Unsecured Ten-Year Six Per Cent. Gold

Notes (R. 159), due October 1, 1932...... 10,500.000.00

On which date there was also payable an

instalment of interest in the amount of.. 315,000.00

The Interborough was without funds

to pay the principal and interest of these

Notes (R. 165).

Floating indebtedness for materials, equip-

ment, taxes and supplies of over......... 2,500,000.00

(R. 164)

Common capital stock of the par value of.. 35,000,000.00

(R. 158)

The principal asset of the Interborough consists of its lease

of the subway properties in the City of New York, granted

to it by the City of New York under a contract known as

Contract No. 3. The Interborough is also the lessee and

operator of all of the elevated railroad properties belonging

to the Manhattan Railway Company under a lease dated

4

January 1, 1903. It also owned certain extensions of the

elevated railways and had rights under a trackage contract

(R. 157).

Manhattan Railieay Company. On August 26, 1982, the

capitalization of the Manhattan Railway Company consisted

of:

Consolidated Mortgage 49% Bonds (First

Mortgage Bonds) in the principal amount

Oe BR RAE ASE gi! pty Dane ar gl A $40,683,000.00

interest on which is payable on the Ist

days of April and October in each year.

Four Per Cent. Second Mortgage Bonds in

the pr-necipal amount of (R. 160) ......... 4,523,000.00

the interest on which is payable on the Ist

days of June and December in each year.

Common Stock of the par value of (R. 159)... 60,000,000.00

All of the railway property of the Manhattan Railway

Company is leased to the Interborough by the aforesaid

lease, pursuant to which as rental the Interborough was obli

gated to pay, among other things, all of the taxes on the

property of the Manhattan or its franchises, the interest due

on the above-mentioned Consolidated Bonds and Second

Mortgage Bonds, and certain dividends on the Manhattan

stock (R. 159, 160).

The result is that on August 26, 1952, the Manhattan

Railway Company, as a company, Was not in possession of

any assets whatsoever except a small amount of cash on hand.

Its property was then and still is in the hands of the Inter-

borough as lessee thereof (R. 254-255). As Boehm in her

brief states (p.3): “Under this lease arrangement, Manhat-

tan became a mere corporate shell and has so continued since

1903.”

i.

BRAKE SHOE SUIT.

On August 26, 1932, The American Brake Shoe and Foun.

dry Company filed its bill of complaint herein, in which it

asked for the appointment of a receiver of the Interborough

Rapi’ Transit Company (R. 153). The Interborough Rapid

Transit Company thereupon on the same date filed its answer

pursuant te the authority of its Board of Directors (fols.

519-521), admitting all the allegations of the bill of complaint

and consenting to the appointment of a receiver or receivers

(fols. 511-518).

The bill of complaint showed that the plaintiff was a Dela-

ware corporation, that the defendant Interborough was a

New York corporation (R. 154, fol. 460), and that the de-

fendant owed the plaintiff $27,530.89, payment of which had

been duly demanded but refused. The suit was stated to

be on behalf of complainant and all others who might join

(R. 153). The complaint and the answer disclosed that the

Interborough was in default in a substantial manner under

its obligations under its aforesaid First and Refunding Mort-

gage securing bonds outstanding in the hands of the public

in the principal amount of more than $152,000,000, and secur-

ing additional bonds in excess of $54,000,000 pledged as

security for its Collateral Notes; that it was in default to

a substantial degree under the terms of its lease of the ele-

vated railroad of the Manhattan Railway Company: that it

was badly in arrears in payment of taxes on its own prop-

erty; that it had due and owing (or would have due and

owing within a few days from the date of the appointment

of the Receivers) indebtedness, which it was absolutely un-

able to pay, for supply bills, rent under the Manhattan lease,

principal and interest of funded indebtedness and past due

taxes in an amount in excess of $48,000,000 (R. 164, 165).

The complaint contained the usual prayer for an adminis-

tration of assets, an injunction and receivers (R. 168, 169).

Thereupon, on August 26, 1932, Judge Manton, holding a

istrict Court for the Southern District of New York pursu-

ant to designation, signed an order appointing Victor J.

Dowling and Thomas E. Murray, Jr., temporary Receivers

of the Interborough (R. 180). The said order further

directed—

“that the parties hereto show cause before the under-

signed * * * on the 22nd day of September, 1932,

ee

CAEP . —

6

* * * why the said receivership should not be con-

tinued during the pendency of this suit and upon the

hearing thereon any other creditor of the defendant or

other party in interest may be heard” (R. 184, fol,

551).

On September 6, 1932, the Manhattan Railway Company

(following the procedure adopted in Re Metropolitan Street

Railway Receivership, 208 U. S. 90) filed its petition for

leave to intervene and asked that the receivership be ex-

tended to embrace the properties of the Manhattan Railway

Company (R. 248-255). Thereupon, on the same date, Judge

Manton appointed William Roberts as temporary Receiver

of the Manhattan Railway Company (R. 196-200). The

order of appointment contained the same provision as was

found in the order appointing temporary Receivers of the

Interborough, to wit, that the parties should show cause on

September 22, 1982, as to why the receivership should not

be made permanent and

“upon the hearing thereon any other creditor of the

defendant or other party in interest may be heard”

(R. 199, 200).

Committees representing the Interborough Rapid Transit

Company First and Refunding Mortgage 5% Gold Bonds

(R. 189), the Interborough Rapid Transit Company Ten-

Year Secured Convertible 7% Gold Notes due September 1,

1932 (R. 191), the Interborough Rapid Transit Company

Ten-Year 6% Gold Notes due October 1, 1932 (R. 193), the

Manhattan Railway Company Consolidated Mortgage Gold

1% Bonds (R. 201), the Seven Per Cent. Guaranteed Stock

of the Manhattan Railway Company (R. 221), the Central

Hanover Bank and Trust Company, as Trustee under the

Consolidated Mortgage of the Manhattan Railway Company

(R. 214), the Guaranty Trust Company of New York, as

Trustee under the First and Refunding Mortgage of the

Interborough Rapid Transit Company (R. 226) and others

have petitioned for and been granted intervention in the

Brake Shoe suit, or on order been made parties (R. 2,3), and

all are supporting the receivership.

hse RCRD

~

(

On September 22, 1932, no one opposing, Judge Manton

(determined to make the appointments of Dowling and Mur-

ray as Interborough Receivers and the appointment of Rob-

ort as Manhattan Receiver permanent and formal orders to

that effect were accordingly entered on September 28, 1932

(R. 223).

Between September 28, 1932, and October 18, 1932, many

administrative orders of one kind or another were made by

Judge Manton in the Brake Shoe suit (R. 226-251).

There was in force, at all times since it was made, a stand-

ing designation of Judge Manton to hold a District Court

made on March 20, 1930 (R. 708, fol. 2122; R. 661). On

August 25, 1932, as Senior Circuit Judge, he made another

designation of himself to hold a District Court for the

Southern District of New York “during the period beginning

August 25, 1932,” and particularly to hear and determine

all applications and proceedings in the matter entitled

“American Brake Shoe and Foundry Company vs. Inter-

borough Rapid Transit Company” (R. 177).

Petitioner Johnson says that his bill and supplemental bill

show that the Brake Shoe suit was collusive (Johnson brief,

p. 2). There is no such averment. The most that can truth-

fully be said is that evidence was pleaded from which the

petitioners now ask the Court to draw that inference.

Petitioner Boehm charges in her brief that the purpose of

the receivership was to enable the Interborough to rid itself

of the Manhattan lease and to bring about a foreclosure of

the Manhattan first mortgage and a purchase of the property

for a nominal sum, and she even suggests that a receivership

could have been avoided (Boehm brief, pp. 8, 9). That is

only one of the many reckless and unwarranted statements

scattered through the petitioners’ briefs, which are wholly

irrelevant to any question now before the Court and which

it would unduly prolong this brief to answer in detail.

The fact is that both petitioners allege in their respective

bills that the appointment of receivers of the Interborough

was imperative (R. 36, 96), and the truth is that the neces-

sary purpose and effect of an equity receivership is to secure

equitable treatment of all interests and to protect them from

Gpreeasesarciw ors

8

the very consequences which said petitioner Boehm charges

are the objects of the suit, and she herself has to admit that

as far as the Manhattan interests are concerned Judge Man-

ton is affording such protection (Boehm brief, p. 12).

The suggestion that Interborough obligations of $48,-

000,000 maturing shortly after the appointment of receivers

could have been refunded or refinanced in September, 1932,

like many of petitioners’ statements, is not to be taken

seriously.

Petitioner Boehm’s statements regarding the relations be-

tween the Manhattan and the Interborough Companies

(Boehm brief, pp. 2-12) show that difficult and important

questions for adjudication are involved. See Johnson

Supplemental Complaint (R. 54). Said petitioner grud-

ingly refers (/d., p. 12) to the protection to the Man-

hattan interests already afforded by the Court “upon the

application of the Mortgage Trustee,” which, it may be ob-

served in passing, has intervened in the Brake Shoe suit and

is supporting the receivership. With equal frankness she

might also have acknowledged that the rights and interests

of the Manhattan Company are being ably and vigorously

asserted and defended by its receiver and his counsel.

The petitioners seek the appointment of receivers of both

Companies in their representative action on behalf of the

Manhattan Company, despite the fact that a receiver of that

Company has already been appointed on its own petition and

after its voluntary intervention in the Brake Shoe suit.

On their own showing the petitioners are seeking the ap-

pointment of receivers to represent conflicting interests in a

suit which they can control, and their assertion of interests

transcending the issues between the parties to the suit

(Boehm brief, p. 14) must. be weighed in the light of the fact

that the Johnson suit was only brought after Judge Manton

had refused to make the palpably unnecessary appointment

of additional receivers of the Manhattan nominated by the

petitioners’ counsel (R. 567, 569).

The petitioners allege in their bills and emphasize in their

briefs the fact that the Manhattan and Interborough Com-

panies have common directors. They omit to inform the

9

Court, however, that the Manhattan directors on the Inter-

borough board are there perforce of contract rights of the

Manhattan Company to have representation on the Inter-

borough board (R. 670).

II.

THE JOHNSON SUIT.

The Johnson suit was, it appears, an outgrowth of the

Barber suit. On August 29, 1932, one Harry Barber, a

stockholder of Manhattan Railway Company, obtained an

order from Judge Manton, holding a District Court pursuant

to designation, permitting Barber to file a complaint in which

the Interborough and its Receivers were made parties defend-

ant (R. 565, fol. 1694; R. 652), and, pursuant to this leave,

on August 29, 1932, the bill of complaint was filed with the

United States District Court for the Southern District of

New York, entitled “Harry Barber, complainant, against

Manhattan Railway Company, Interborough Rapid Transit

Company, Victor J. Dowling and Thomas E. Murray, Jr., as

Receivers of Interborough Rapid Transit Company, and

others,” wherein the complainant as a mere stockholder of

the Manhattan, after setting forth the provisions of the Man-

hattan lease, prayed that an account be taken as between the

Interborough and the Manhattan under the Manhattan lease,

and that a Receiver be appointed for the Manhattan Railway

Company (R. 564, fol. 1692; R. 6138).

On September 6, 1932, a hearing was had before Judge

Manton on an order to show cause obtained in the Barber

suit as to why receivers of Manhattan should not be ap-

pointed, and there appeared, among others, Charles Franklin,

who stated that he was counsel for a Committee called

“Manhattan Common Stockholders’ Protective Committee,”

composed of Nathan L, Amster and others, including Charles

Franklin himself, and also on behalf of Brookin Corporation

and Llewellyn Hernly, who had deposited stock with said

Committee (R. 566, fol. 1696). Louis Boehm also appeared

as an attorney, who stated that he was counsel for certain

stockholders of Manhattan (R. 566, fol. 1696).

Ct sal

10

Said Franklin and Boehm stated that their clients were

intervening in the Barber suit (R. 566, fol. 1697; R. 567, fol.

1700), and at that time a petition for intervention in the

Barber suit on behalf of Franklin, said Manhattan Railway

Company Common Stockholders’ Committee and the Brookin

Corporation was presented to Judge Manton.

Judge Manton informed counsel that on the application

of the Manhattan Railway Company itself in the Brake Shoe

suit he had appointed William Roberts to be Receiver

of the Manhattan Railway Company (R. 566, fol. 1698),

Thereupon Mr. Franklin urged Judge Manton to appoint

Nathan L. Amster as an additional Receiver as being the

relief which he particularly desired at the time (R. 567, fol.

1701). Mr. Boehm limited his request to the appointment

of Mr. Malcolm Sumner as a co-receiver with Mr. Roberts

(R. 569, fol. 1705). Judge Manton expressed the opinion

that two receivers of the Manhattan were not needed at the

time (R.568). Obviously, Judge Manton was not authorized

in the Barber suit, on such a mere stockholders’ bill without

answer, to appoint any receivers of the Manhattau.

The affidavit of Charles Franklin, attorney for Johnson

(R. 683, fol. 2048), and the affidavit of Louis Boehm, also of

counsel for Johnson (R. G88, fols. 2063, 2064), make it

clear that the subsequent institution of the Johnson suit

arose because of their disappointment over the failure of

Judge Manton to appoint either Mr. Amster or Mr. Sumner

as a co-receiver, with Roberts, of the Manhattan Railway

Company, as suggested by them in the Barber suit.

Under the express invitation given by the terms of the

order appointing temporary Receivers of the Interborough

and the express invitation given by the terms of the order

appointing Roberts temporary Receiver of Manhattan, Mr.

Franklin, as representing the stockholders om whose behalf

he had intervened in the Barber suit, and Mr. Boehm, as rep-

resenting his wife, Lillian Boehm, could have appeared in

the Brake Shoe suit on September 22, 1932, without inter-

vention therein and have made all of the contentions with

respect to the validity of the appointment of Receivers by

Judge Manton which they have subsequently made. They

Beet

ee

Ge a

y

11

could have asked for the appointment of other receivers, or

for the transfer of the cause to another Judge on the ground

that Rules 1-a and 11-a (quoted in the footnote, p. 12) so

required, and according to the settled practice in the Second

Circuit, as stated by Judge Learned Hand (R. 1033), they

could have appealed from an adverse decision. Instead, they

decided to treat Judge Manton’s orders as utter nullities,

as mere blank paper, and to institute an independent suit.

On September 20, 1952, the Johnson suit was begun when

United States District Judge Francis G. Caffey signed an

order granting Benjamin F, Johnson leave to file his bill of

complaint in which he made the Manhattan Railway Com-

pany, William Roberts as temporary Receiver thereof, Inter-

borough Rapid Transit Company, Victor J. Dowling and

Thomas E. Murray, Jr. as temporary Receivers thereof, the

City of New York and The American Brake Shoe and Foun-

dry Company, defendants (R. 7). This is one of the orders

from which an appeal was taken to the Cireuit Court of

Appeals and which was reversed by that Court. No specifi-

cation of error with respect to such reversal is made by the

petitioners in this Court.

Johnson's bill of complaint alleges that he is a resident

of Kentucky and is the owner of 100 shares of stock of the

defendant Manhattan Railway Company (R.15). The action

is alleged to have been brought by the complainant in his

derivative capacity as a minority stockholder of the Manhat-

tan Railway Company in his own behalf and in behalf of

other stockholders (R. 14, fol. 42). /t is primarily a suit for

an accounting between the Manhattan and the Interborough

Companies. The complaint stresses the grave danger to the

Manhattan security holders unless the receiverships of the

Interborough and the Manhattan are continued (R. 36, 37)

and that the situation “requires” the Court to continue the

receiverships with new receivers.

The complaint alleges that the appointment of receivers

in the Brake Nhoe suit was irregular and void for the

specifie reason that that was in contravention of Rules

Ce 12 aa

l-a and 1l-a* of the District Court (R. 15, 16). It further

alleges various rights of the Manhattan Railway Company

under the lease of its property to the Interborough, and

the grave danger to the Manhattan Railway Company of

a possible foreclosure of its Consolidated Mortgage (R. 36,

fol. 107), and prays that the Designation Order be vacated,

that the Division of Business Order be vacated, that the

appointment of temporary Receivers of the Interborough be

vacated, that the appointment of a temporary Receiver of

the Manhattan be vacated, and that the Court appoint |

“independent receivers” for the Interborough and “inde-

pendent receivers” for Manhattan (R. 438, fol. 129), and

that, among other things, an account be taken of the sums

due and owing the Manhattan by the Interborough (R. 44,

fol. 181). Ma. Louis Boehm was of counsel on the bill of

complaint which was signed and verified (R. 571) by Mr.

Charles Franklin (R. 48, fol. 144).

On September 21, 1982, Judge Catfey also made an order

in the Johnson suit on the consent of Franklin, attorney for

Johnson, permitting Lillian Boehm to intervene therein as

a party plaintiff (R. 138, fol. 418). The petition of Boehm

for leave to intervene asserted that she was the holder of

stock of the Manhattan Railway Company and also the

holder of First Mortgage Bonds of the Manhattan Railway

Company (R. 139, fol. 417), and also the holder of First

and Refunding Mortgage Bonds of the Interborough (R.

140, fol. 418).

Having been permitted to intervene in the Johnson suit

as a stockholder of the Manhattan, Lillian Boehm, on Sep-

tember 21, 1932, filed a bill of complaint (R. 80) therein,

in which she asserted that her rights were based on the

ownership of First and Refunding Bonds and of Ten-Year

Secured Convertible 7% Gold Notes of the Jnterborough.

Her complaint makes no mention of ownership of either

stock or obligations of Manhattan, It contained allega-

tions that were evidently aaa to a large degree from the

*1-a, An bedlees designated to sit in the District Court for the Southern

District of New York, shall do such work only as may be assigned to him

by the senior district judge.

11-a. All applications for the appointment of receivers in equity causes,

in bankruptcy causes and any other causes (except where a receiver in bank-

ruptey may be appointed by a referee as provided in the Bankruptcy Rules),

shall be made to the judge assigned to hold the Bankruptcy and Motion Part

of the business of the court and to no other judge. Ay

13

pill of complaint in the Brake Shoe suit (so stated Boehm’s

prief, p. 13). It alleged that under the circumstances it

was imperative that there be appointed a receiver of the

Interborough (R. 96, fol. 287), and that the appointments

of Dowling and Murray should be set aside and independent

receivers wnder properly constituted authority be appointed

(R. 97, fol. 290). The prayer of the bill was that the

Designation Order and the Division of Business Order be

vacated, that the appointments of Dowling and Murray, and

all other proceedings before Judge Manton be vacated, and

that the Court appoint “independent receivers” of the Inter-

borough (R. 108, 109).

On September 24, 1982, a Committee of Stockholders of

the Manhattan, of which Nathan L. Amster was chairman,

Charles L. Franklin a member and also counsel, intervened

in the Johnson suit (R. 142, 144).

On October 3, 1932, Johnson filed a supplemental bill of

complaint (R. 49) in which he claimed that—

“In addition to the interest of complainant who has

instituted this suit in his derivative right as a stock-

holder of Manhattan * * * for the benefit and pro-

tection of Manhattan and all stockholders similarly

situated, including bondholders and all others finan-

cially interested in said company, * * *” GR. 50,

fol. 148) ;

although neither in the original bill of complaint nor in the

supplemental bill of complaint did Johnson allege the owner-

ship of any bonds or anything other than Manhattan stock.

No answers to the complaints in the Johnson suit had been

filed by any of the defendants in the Johnson suit at the time

of Judge Woolsey’s decision.

Three orders to show cause as to why all of the orders

of Judge Manton in the Brake Shoe suit should not be

vacated having been obtained by Johnson and Lillian Boehm

in the Johnson suit (R. 114-117, 128-125, 180-132), these

various orders were argued before Judge Woolsey on Octo-

her 6, 1982 (R. 812-996). The questions before this Court

arise from these orders to show cause. The minutes of the

EP MEPS Rect STR Sy ROS

: 14

hearing before Judge Woolsey were filed in the District Court

pursuant to Judge Woolsey’s direction (R. 997) and were

included in the Transcript of Record at the insistence of

counsel for Johnson.

On October 13, 1932, Judge Woolsey filed his opinion (R.

694-721).

On October 18, 1932, two orders were entered pursuant to

the said opinion. The first order was an order made by

Judge Woolsey on his own motion and “against the objection

and protest” of the parties to the Brake Shoe suit (R. 722,

fol. 2166) consolidating the Johnson suit with the Brake

Shoe suit under the title of “In the Matter of the Inter-

borough-Manhattan Receivership Proceedings.” This order

having been made and filed (R. 994, 995), Judge Woolsey

then made his second order, the order vacating the orders

of Judge Manton (R. 725). In this Vacating Order, Judge

Woolsey denied the motions in so far as they sought to have

vacated the Desiguation Order and the Division of Business

Order (R. 728, 729, fols. 2184-2185). No appeal was taken

by Johnson or Boehm from the order of Judge Woolsey

denying their motion to vacate the Designation Order and

the Division of Business Order.

No specification of error is made by the petitioners in

respect of the reversal of the Consolidation Order. Although

Claiming that Rules l-a and 11-a are jurisdictional, both peti-

tioners Johnson and Boehm defend them as merely “calen-

dar” rules (Johnsor brief, p. 11; Bochm brief, p. 44).

Brier or The Ciry or NEW York.

Without having previously received a copy thereof, the

parties hereto gave consent to The City of New York to file

a brief as amicus curiae. The brief of the City as served is

devoted to contentions which have no relationship whatso-

ever to the questions presented to this Court. If the brief

of the City demonstrates anything pertinent, it is that public

interest attached to the interborough receivership proceed-

ing. The City does not question the jurisdiction of Judge

Manton (City’s brief, p. 13).

Se |

The Controversy.

As was stated by Judge Learned Hand in the opinion of

the Court below (R. 1028):

“The controversy does not touch the substantial re-

lief asked by any of the parties; all acknowledge that

the two railways are in such financial straits that a

court of equity must take over their assets, to prevent

their dismemberment by execution, attachment and

the like. The plaintiffs, and those who have inter-

yened, ask for receivers just as do the parties to the

American Brake Shoe Company suit. The dispute

touches merely who shall be the receivers and who

the Judge to have charge of the receivership.” (Italics

ours. )

Petitioner Boehm, at page 30 of her brief, says:

“Petitioners were not seeking a complete disruption

of the receivership proceedings. Substantially they

sought only a removal of the proceedings to the proper

district judge and an appointment of different and

independent receivers.”

See similar statements at page 26 of Boehm’s brief.

As to who shall be receivers of the Interborough, we bhe-

lieve that there never in fact has been any real controversy.

The Johuson bill makes no charges against the Interbor-

ough Receivers, except the inconsequential claim that Judge

Dowling had been a member of the firm of Chadbourne,

Stanchfield & Levy, and that this firm had at one time done

some legal work for the Brooklyn-Manhattan Transit Com-

pany and the Interborough (see R. 24, fols. 71, 72; R. 72, 73,

74, fols. 215-220).

As to who shall be receiver of the Manhattan (which, so

long as the lease to the Interborough continues, has practi-

cally no tangible property which would come into the posses-

sion of a receiver—in fact is, as Boehm states in her brief

[p.3], “a mere corporate shell” )—there has been controversy,

the clients of Mr. Franklin desiring, at the outset, the ap-

pointment of Mr. Amster as a co-receiver with Mr. Roberts

(R. 567), and, later, the removal of Mr. Roberts on the charge

that he, as President of Manhattan, had not been diligent,

and on the further charge that he was not independent of

Interborough influence and the appointment of Mr. Amster

ag enle raeniver in hic atand (DR OK OR Fala PRT

16

The Issue.

The sole and oniy question before the Court is whether

Judge Manton’s orders were void for want of jurisdiction.

The claims now advanced by the petitioners that there was

impropriety in the appointment of receivers at the suit of

a simple contract creditor on the consent of the defendant,

that the suit was collusive, that it was brought for ulterior

purposes and other like claims, are irrelevant to any ques-

tion before the Court.

While counsel for Johnson endeavored to argue before

Judge Woolsey the charge that the proceeding for the

appointment of a receiver of the Interborough was a “col-

lusive one,” Judge Woolsey refused to hear argument on

that point (R. 848, fol. 2545; R. 931, fol. 2793). The matter

was not discussed in any way in Judge Woolsey’s opinion.

It was not argued before the Cireuit Court of Appeals and

was not considered in the opinion of the Circuit Court.

of Appeals and is not before this Court.

The petitioner did not, either in his bill of complaint, his

petition for the orders to show cause, or in his argument

before Judge Woolsey, or before the Cireuit Court of

Appeals, attack the orders appointing Receivers of the

Interborough as being “consent decrees” based upon a bill

That question is not before

.

of a “simple contract creditor.

this Court.

Even assuming that such matters were properly pleaded

in the bill in the Johnson suit and that they could be raised

in that suit, they certainly could not be decided without a

trial on the facts and even in advance of answer.

The motions were made on the proceedings in the Brake

Shoe suit, the Barber bill and the bill, the supplemental bill

and petition in the Johnson suit before answer (R. 125, 124).

Judge Woolsey decided the matter solely as a question of

law. The vacating order adjudged that the orders in the

Brake Shoe suit be “vacated and set aside as wholly void and

of no juridical effect” (R. 725), this for the sole and only

reason, as shown by the opinion, that the proceedings before

Judge Manton “were not proceedings before a judge de jure

or before a judge de facto, but were acts which involved

usurpation of power which he had not and, consequently,

were ill coram non judice and wholly void and of no effect” £

a ep ran va

POINT

I.

II.

III.

VI.

VII.

VINE.

17

SUMMARY OF ARGUMENT.

|

PAGE

Judge Manton was duly empowered to hold a

District Court with all the rights, powers and

Guttes of a District Judge. ............-.....

The District Judges were without power to

deprive designated Judges, whether Circuit

Judges or District Judges, of the authority

and jurisdiction vested in them by the statute.

So-called Rules l-a and il-a adopted by the Dis-

See Pt GD HUNTER, 2. oo nc ccccccsenesse

Rules 1l-a and 1l-a, even if valid, do not have

the effect of depriving a Judge of the jurisdic-

tion conferred upon him by the statute, whether

he be a Judge de jure or de facto.............

The orders made by Judge Manton in the Brake

Shoe suit were not subject to collateral attack.

The petitioners’ specifications of error do not re-

fer to the reversal of Judge Woolsey’s order

consolidating the Johnson suit and the Brake

Shoe suit. Said order was unauthorized, and

in any case the two suits remained distinct

Se a ee ee ee

The petitioners have no standing in an independ-

ent suit either to apply for the appointment of

receivers of the Interborough or to attack the

orders appointing such receivers. ...........-

The question as to the power of the Court to

appoint receivers at the suit of a simple con-

tract creditor on the consent of the defendant

and the question as to whether the Brake Shoe

suit was collusive are separate and distinct

questions. Neither is presented by the record.

The Johnson suit was not a direct attack......

The rights of the intervenors have become para-

nina sobs DadOs Kens ects cewsewecivece ss

The decree of the Circuit Court of Appeals should

PN kk ace e cnn andcne ncn deanewtas ewes

18

St

NR

61

1s

POINT I.

Judge Manton was duly empowered to hold a District

Court with all the rights, powers and duties of a Dis-

trict Judge.

(a) Historical background of designations of Circuit

Judges to hold District Courts.

When Chief Justice Marshall’s power to hold a Circuit

Court was challenged on the ground that, under the Con-

stitution, the Justices of the Supreme Court had appellate

jurisdiction only, except in the two cases where a State or

a foreign minister was a party, this Court held that the

challenge came too late, that practice and acquiescence had

set the question at rest.

Stuart vo Laird, 1 Cranch, 299,

From that time until the business of the Supreme Court

immade it impractical, Circuit Justices held, and were required

by statute to hold, at stated intervals, Circuit Courts.

When the Circuit Court of Appeals was created, the Chief

Justice, the Associate Justice assigned to each Circuit, the

Circuit Judges and the District Judges within each Circuit,

were competent to sit as Judges of the Circuit Court of Ap-

peals.

Section 3 of the Act of March 3, 1891 (26 St. at L.

S26, Sess. II, Chap. 517).

Thus the District Judges and the Circuit Judges exercised

both appellate and original jurisdiction.

When the Circuit Courts were abolished upon the adoption

of the Judicial Code in 1911, provision was made for the first

time for the designation of Circuit Judges to hold District

Courts. That provision must be construed in the light of its

background. It undoubtedly was adopted because, among

other reasons, the jurisdiction of the Circuit Courts, in which

courts the Circuit Judges had exercised original jurisdiction,

was transferred to the District Courts.

Re

19

As originally passed in 1911, it read:

“Sec. 18. Whenever, in the judgment of the senior

circuit judge of the circuit in which the district lies,

or of the circuit justice assigned to such circuit, or of

the Chief Justice, the public interest shall require,

the said judge, or associate justice, or Chief Justice,

shall designate and appoint any circuit judge of the

circuit to hold said district court” (Sec. 18, Judicial

Code, Act of March 3, 1911).

The first sentence of said section, as revised in 1922, now

reads:

“The Chief Justice of the United States, or the cir-

cuit justice of any judicial circuit, or the senior circuit

judge thereof, may, if the public interest requires,

designate and assign any circuit judge of a judicial

circuit to hold a district court within such cireuit”

(United States Code, Tit. 28, Sec. 22 [Judicial Code,

Sec. US|). (Ttalies are ours. }

Sections 17 to 21, Title 28, of the United States Code

(Secs. 13 to 17 of the Judicial Code) provide for the designa-

tion of a District Judge of another district or circuit by the

Chief Justice, the Circuit Justice or the Senior Circuit Judge,

as the case may be, on account of the disability or the absence

of a District Judge or the accumulation or urgency of busi-

ness, and Sections 24 and 25, Title 28, of the United States

Code (Secs. 20 and 21 of the Judicial Code) provide for

similar designation in case of the disqualification or bias of

a District Judge.

The provision of Section 22, Title 28, of the United States

Code (Sec. 18 of the Judicial Code) for the designation of

Circuit Judges is not thus limited. Plainly the purpose was

to chable Circuit Judges to exercise original jurisdiction by

holding District Courts, the same as they had previously done

in the Circuit Courts, if the Chief Justice, the Circuit Justice

or the Senior Circuit Judge considered it in the public inter-

est for them to do so.

Thus the plain terms of Section 18 (of the Judicial Code)

and the other sections in the context refute the assertion of

petitioner Johnson that the sole public interest is “to prevent

a congestion of business,” and the quotations from the Con-

Sppeenssremanaerensn se) ter ee

20

gressional Record on pages 27 to 29 of said petitioner's brief

to support that assertion are inadequate and misleading,

The legislative history of Section 18 (of the Judicial Code)

demonstrates that it was not intended to serve any such lim-

ited purpose, but that on the contrary its real purpose was ;

to enable Circuit Judges to exercise original purisdiction in

the District Courts, as they had theretofore done in the

Cireuit Courts, and especially to hear and determine par-

ticular cases of especial importance.

Section 18 of the Judicial Code as contained in the bill

when first introduced in the House of Representatives in 1911

is identical with the section as finally enacted. The Congres-

sional debate shows that certain Congressmen, notably Mr.

Parsons of New York, one of the conferees for the House on

the final passage of the bill, and Mr. Parker of New Jersey,

who was then Chairman of the louse Judiciary Committee,

vigorously opposed any provision in the bill which would con-

fine the Circuit Judges to appellate work.

Congressman Parsous offered an amendinent to Section 116

of the Judicial Code as first read to the House to provide

generally that the Circuit Judge should at all times have

throughout his cireuit the powers and jurisdiction of a Dis-

trict Judge, and he stated that the object of the amendment

was to give the Circuit Judges the power that they then had.

The Parsons amendment was agreed to by the House, sitting

as a Committee of the Whole (Congressional Record, Vol.

46, Part 3, p. 2155). The House bill was sent to conference

containing Section 18 as finally enacted and also the Parsons

amendment giving Circuit Judges the powers and = juris-

diction of the District Judge (Congressional Record, Vol.

46, Part 4, p. 3220). The conference report as read to the

Ifouse shows that the Parsons amendment was stricken out

during conference. The statement appended to the confer-

ence report contains the following as recorded on page 4001;

“Section 118 (116). An amendment was made by

the House as follows:

“and, (the circuit judge) as well as the circuit jus-

tices, shall have throughout his cireuit the powers

and jurisdiction of a district judge.’

21

The House conferees agreed to this being stricken out

in view of the fact that provision for the assignment

of circuit judges to sit in the district court when the

exigencies of business require it was provided for by

Section 18 of the act.”

The striking out of the Parsons amendment was objected

to by Mr. Parker (p. 4003), to whom Chairman Moon, Chair-

man of the Committee on Revision of Laws, replied (p. 4003) :

“In view of the fact that ample provision already

existed in the bill for a circuit judge to sit as a

district judge, that provision was found entirely un-

necessary.”

Further discussion of the Parsons amendment appears on

page 4004, as follows:

“Mr. Sherley (one of the House conferees) : There

was also an amendment undertaking to give to the

circuit judges and justices of the Supreme Court the

right to sit in district courts. As to the circuit

judges, I think that right is retained in the bill al-

though the Parsons amendment is not retained in it.

Mr. Parker: How is it retained as to circuit judges?

Mr. Sherley: Because at the time the amendment

of the gentleman from New York (Mr. Parsons) was

put on the bill, as was stated then, it was unnecessary,

and simply repeating another provision in the law.

The gentleman from New Jersey shakes his head, but

that is not only my opinion, but that of all the con-

ferees. As to the justices of the Supreme Court, we

did not believe there was any actual need of their

going into a district court, nor any possibility, con-

sidering the business of that court, of their going into

a district court, and it was accordingly stricken out.”

Mr. Parker, in asking that the conferees’ report be dis-

agreed to, stated at page 4006 (Congressional Record, Vol.

46, Part 4):

“Does he (Mr. Moon) forget that in all the hundred

districts of this land there are a hundred different

judges, some of them weak and some of them strong,

and that under the present law in great cases involv-

ing great issues, whether of trust matters or railroad

REPRE es

matters, the circuit court may be presided over hy

circuit judges who can go to those cases and can hear

those cases, whereas it is now provided that no one

except in the case of the disability of the district, can

go into that district?

Mr. Moon of Pennsylvania: Oh, no.

Mr. Parker: Show me that section.

Mr. Moon of Pennsylvania: It provides for that

when the public interests require.”

In the Senate, the Congressional Record shows that when

Section 18 of the Judicial Code was first read to the Senate,

Senator Heyburn, in charge of the bill and one of the con-

ferees for the Senate on the final passage of the bill, said:

“Mr. Heyburn: I will say, in connection with this

section, that it is a new provision, but one that is

rendered necessary by reason of the consolidation of

these courts, and it is in entire conformity with the

existing practice” (Congressional Record, Vol. 45,

Part 4, p. 3547).

Also see Senator Heyburn’s remarks on pages 3999 and 4000

of Congressional Record, Vol. 45, Part 4.

Senator Sutherland, at the time a member of the Special

Joint Committee on the Revision of the Laws and also of the

Judiciary Committee and also one of the conferees for the

Senate on the final passage of the bill, makes it clear that the

fears expressed by Senator Bacon of Georgia, that the Circuit

Judges would not be permitted to sit in the District Court,

were unfounded, Senator Sutherland stated (Congressional

Record, Vol. 46, Part 1, p. 840):

“Mr. Sutherland: Mr. President, I think when we

come to consider this bill, the Senator from Georgia

will find that these protests are being made under a

misapprehension as to precisely what the bill does

provide. I think the misapprehension consists in the

belief that the circuit judges will be prevented from

hereafter sitting upon the trial bench. The bill does

not undertake to do that at all. The bill simply con-

solidates the original jurisdiction in a court to be

called the district court. For myself I can see no

earthly reason why we should have two courts of orig-

9

a?

ina] jurisdiction; but we have provided in the bill,

with the utmost flexibility, for the circuit judges sit-

ting in the district court as trial judges. I think,

when we come to consider the bill, the Senator from

Georgia will find that these protests are made under

that misapprehension.”

Consideration of the bill was concluded on February 8,

1911. At that time Senator Sutherland, in discussing Sen-

ator Root’s motion to strike out the section which consoli-

dated the Circuit and District Courts, stated as follows

(Congressional Record, Vol. 46, Part 3, p. 2138) :

“This bill, however, does not destroy the flexibility

which exists under the present law. The circuit judge

may still go to the district court and hold court, only

he will hold as a circuit judge presiding over the dis-

trict court.

The flexibility, however, of the whole system which

perinits an interchange of judges is not in any manner

fected by this change in the law while we are getting

rid of the conditions of which I have spoken, which

are immensely expensive to the Government.”

Speaking against the same motion, Senator Clarke of Ar-

kansas, also a member of the Special Joint Committee on

Revision of the Laws and one of the Senate conferees, stated

(p. 2138):

“It (the proposed consolidation) will assign to their

appellate functions the judges of the circuit court,

and it will reserve their right to appear upon the dis-

trict bench, just as it reserves in favor of the judges

of the Supreme Court of the United States whenever

an occasion of sufficient importance seems to make it

necessary, the right to sit in the circuit court.”

Following this discussion, the Root motion was rejected

and the bill was passed. The Senate bill was then rejected

by the House and was sent to conference. The conference

report was finally approved by the Senate (Congressional

Record, Vol. 46, Part 4, p. 3853) with Sections 18 and 2:

intact as originally read.

24

That it was contemplated and intended that Section 18

would be resorted to when important cases arose also js

shown by the following colloquy between Congressman Bart-

lett of Georgia and Chairman Moon of the House Committee

on Revision of the Laws:

“Mr. Bartlett of Georgia: * * * But you have, as

I understand it, in this amendment to the law, in

section 18, which is new, made a provision by which

a circuit judge can be required to go and preside in

important cases whenever, in the judgment of the

senior circuit judge, it is found necessary to assign

a circuit judge to the district court?

Mr. Moon of Pennsylvania: That is true; in order

that this bill shall not require the creation of any

additional judges and that the present judicial force

of the country shall administer the business just as

it does now.

Mr. Bartlett of Georgia: So that the cases will be

more frequently tried in the district court by circuit

judges than in many instances they are tried now?

Mr. Moon of Pennsylvania: Fully as frequently

anyhow” (Congressional Record, Vol. 46, Part 1, p.

302).

Since the adoption of the Judicial Code in 1911, every

Senior Circuit Judge in the Second Circuit, beginning with

Judge Lacombe and followed by Judges Ward, Hough,

Rogers and Manton (R. 553), has designated himself to hold

District Courts, sometimes to hear a particular case (R. 655-

661; and see Penn, Steel Co. v. New York City Ry. Co., 221

Fed. 440). That power has been continuously exercised by

the Senior Circuit Judges of other circuits, both generally

and to hear and determine specific cases (R. 555, 662; and see

(United States v. Gill, 292 Fed. 186).

The Northern District of Illinois is more nearly compar-

able with the Southern District of New York than any other.

The Senior Circuit Judge regularly designates himself and

all the other Circuit Judges to hold District Courts in that

district (R. 555).

With the knowledge of that practice, the Congress in 1922

re-enacted said Section 1&8 in more precise language and added

25

a provision expressly conferring on a judge so designated all

the powers, rights and duties of a district judge, save for

the specified exceptions. The omission of the clause con-

taining the phrase “in his judgment” can have no significance

since necessarily the one having the power to designate must,

in the exercise of his judgment, determine the fact of public

interest, and the obvious purpose of the revisers was to

simplify the section without change of meaning.

Obviously the public interest might and often has required

such designations for particular business; and in districts

like the Southern District of New York and the Northern

District of Illinois there are obvious reasons why the resident

Circuit Judges should have standing designations so as to be

available to suitors at all times. Wherefore, in accordance

with the practice followed in the Second Circuit since 1911

(R. 554), Circuit Judges, resident in the Southern District of

New York, Judge Augustus N. Hand, Judge Learned Hand

and Judge Manton, have standing designations to hold Dis-

trict Courts in that district.

In addition to the standing designation of Senior Circuit

Judge Manton to hold a District Court made on March 20,

1930, as aforesaid (R. 661), he also designated himself to

hold a District Court and particularly to hear and determine

all applications and proceedings in the Brake Shoe case on

August 25, 1982 (I. 177).

District Judges of other districts or circuits can be desig-

nated only for specific reasons, i. e., on account of the accumu-

lation or urgency of business, the disability, absence, dis-

qualification or bias of a District Judge. Circuit Judges,

however, are to be designated “if the public interest requires”:

it. Such public interest, for reasons other than those speci-

fied for the designation of District Judges, will ordinarily

relate either to the particular business to be done or to

conditions peculiar to a district like the Southern District

of New York.

26

(b) The existence of public interest justifying the desiqna-

tion cannot be inquired into.

The statute does not require evidence of the fact of public

interest to be presented to the judge making the designa-

tion. Necessarily he determines that from his own knowl-

edge of the conditions in his circuit, charged as he is by the

statute with supervisory authority. The designations of

March 20, 1980 (R. 708) and of August 25, 19382 (R. 177)

both recite the requirement of the public interest, but neither

recital purports to be based on any evidence presented to

the judge.

The record does not “affirmatively” show “what the alleged

public interest was,” nor does it state the “evidence” of such

interest as is stated in Point II of petitioner Johnson’s brief

(p. 21).

The affidavit of Mr. Quackenbush (R. 175) referred to

by both petitioners says nothing about the public interest.

It merely shows the importance of appointing individual re-

ceivers, Which is so obvious that petitioner Boehm says “it

is inconceivable that a district judge would not have recog-

nized” it (Boehm brief, p. 33).

Petitioner Boehm makes the remarkable suggestion that

instead of applying to Judge Manton the parties to the Brake

Shoe suit should have applied to a judge of the Eastern Dis-

trict of New York, into which the Interborough lines extend

and where “trust companies are not appointed either in

equity or bankruptcy,” if they desired to avoid the appoint-

ment of a trust company (Boehm brief, p. 33).

The record discloses that the Brake Shoe bill was filed in

the Eastern District of New York and that the same receivers

were there appointed by Judge Campbell (R. 583), a cogent

reason for not now creating chaos and confusion by attempt-

ing to appoint other receivers in the Southern District in

another suit, and an equally cogent reason why the peti-

tioners’ objections, if they have any, should have been made

in the Brake Shoe suit.

» ‘4

Petitioner Boehm concedes “that the exercise of the power

conferred upon the senior circuit judge is ordinarily con-

elusive and may not be challenged at any time and in any

proceeding where his order of designation may be involved,”

but claims that that conceded rule does not apply “where

it clearly and fully appears that the senior circuit judge has

acted upon grounds unauthorized by the statute” (Boehm

prief, p. 29). To support that statement she refers to the

opinion of Judge Manton, which is not in the record, which

was not before Judge Woolsey and was not even written

until after Judge Woolsey’s decision, That opinion, if the

Court sees fit to refer to it, disproves the statement that the

Senior Circuit Judge acted upon grounds unauthorized by

the statute (1 Fed. Supp. 820).

Said petitioner concedes that the objection must be

“timely” and made “at the beginning” of the case. Obvi-

ously, if lack of publie interest goes to the jurisdiction of the

Court, timeliness is of no consequence, and it can be inquired

into. The position taken is tantamount to a concession that

lack of public interest is not jurisdictional, If it is not

jurisdictional, it, of course, cannot he inquired into,

Whilst we are not concerned on this appeal with the rea-

sons for Judge Manton’s conclusion that the public interest

required his designation, both generally to hold a district

court and specifically to hear the Brake Shoe case, which

conclusion is not reviewable, the petitioncrs themselves dem-

onstrate that the case was one of unusual importance and

public interest. Petitioner Boehm refers to it in her brief

as “a receivership involving so great a public interest” (p.

33), and as a case of “great economic, social and even politi-

‘al significance” (p. 15).

Boehm, in her brief, even asserts that public interest at-

taches to the question of the appointment of individuals as

Receivers for such a company as the Interborough. In point-

ing out that the District Judges had not adopted a practice

of uniformly appointing the Irving Trust Company as re-

Pepe sserserewe re HOw - . —

28

ceiver in equity cases, though they do so in bankruptey cases,

Boehm says, page 45:

“In equity cases the District Judges have not taken

so drastic a step—influenced perhaps to some extent

by the opinions similar to that of Judge Manton that

some equity receiverships require, in the public inter-

est, that individuals be appointed.” (Italics ours. )

Johnson, in his supplemental bill of complaint, paragraph

VIII (R. 56, fol. 168), after setting out at length some of

the issues in the Interborough Receivership which he says

are “bound to arise and will require judicial determination”

(such as important questions arising under the Manhattan

lease), goes on to say:

“The foregoing are not idle or moot questions stated

for the purpose of alarming the court. They are vital

questions affecting the future of both companies * * *,

The amounts involved on each issue will probably

run into many millions of dollars. The public interest

is seriously involved in most, if not all of the issues

raised.” (Italics ours.)

As to what is embraced within the phrase “public interest,”

see

Lawrason Vv. Swartz, 132 La. 511, 61 So. Rep. 554

(1913).

It was, then, peculiarly the kind of case for a circuit judge,

and certainly for the senior circuit judge to take jurisdiction

of, if he thought he could spare the time from his other duties,

and that was for him alone to decide. It was peculiarly the

kind of case which the district judges, with the burden of

their congested calendars, would naturally be glad to be re-

lieved of. It was peculiarly the kind of case which the Con-

gress thought circuit judges would be designated to hear

when in 1911 it preserved the existing flexibility of the judi-

cial system and the interchangeability of judges between

appellate courts and courts of original jurisdiction, and pro-

=

29

vided for the exercise of original jurisdiction by circuit judges

in the district courts, the same as they had theretofore exer-

cised such jurisdiction in the circuit courts.

In any ease, the sole responsibility and duty is upon the

one having the power to designate. The decision as to the

public interest is vested in him. He acts administratively.

If his decision be the subject of review or collateral attack,

no litigant could safely submit any business to a designated

Judge.

In Ex parte American Steel Barrel Co., 230 U. 8. 35,

application was made for a writ of mandamus to command

Judge Chatfield, District Judge of the United States for the

Eastern District of New York, to resume jurisdiction and

proceed to hear and determine the matters in the case of “In

ve Ironclad Manufacturing Company.” During the course

of the proceeding of this case before J udge Chatfield, an affi-

davit of bias was filed. Whereupon, Judge Chatfield,

pursuant to the provisions of Section 25, Title 28, of the

United States Code, certified the situation to Judge Henry E.

Lacombe, Senior Circuit Judge for the Second Circuit, who

thereupon, pursuant to the provisions of Sections 25 and 17,

Title 28, of the United States Code, designated Judge Mayer

of the Eastern District to hear the case. The contention in

the mandamus proceeding was that Judge Chatfield was not

disqualified and that accordingly a designation of Judge

Mayer was improper and Judge Mayer was entirely without

jurisdiction to proceed, but that the matter should continue

before Judge Chatfield.

The Court took the view that even if Senior Circuit

Judge Lacombe had not acted strictly in pursuance of the

authority conferred on him by statute, if he had “made a

mistake.” nevertheless his action was not subject to review.

The Court said (230 U. 8. 45, 46) :

“Jndge Lacombe was clearly called upon to deter-

mine in the exercise of his jurisdiction as the Senior

Circuit Judge, whether the situation was one in whic

he should designate a Judge in the room and place of

a. |

.

Qpnnereree TEE: a oe

30

Judge Chatfield. He determined the matter adversely

to the petitioners. If in this he made a mistake, it

was one made in the course of the exercise of his

legitimate jurisdiction under sec. 14 of the new Judi-

cial Code, and we cannot compel him through a writ

of mandamus to undo what has thus been done.”

A statute of New York State authorizes the Governer to

appoint an extraordinary term of the Supreme Court, desig-

nating the Justice to hold it “whenever in his opinion the

public interest so requires.” A designation by the Governor

under that statute of a Justice to hear and determine motions

for new trials in specific actions, and, if granted, to try them,

was held by the Court of Appeals of New York to be beyond

the province of the courts to inquire into.

People ex rel. 8S. L. & T. Co. vy. Supreme Court, 220

N. Y. 487.

People v. Ballard, 134 N. Y. 269, had to do with an action

brought in the name of the People of the State of New York

by the Attorney General to remove the directors of a domestic

business corporation from their positions for misconduct

and to compel them to account. The statute provided that

the action might be brought by the Attorney General “if, in

his opinion, the public interests required that an action

should be brought.” The Court held (134 N. Y. 293):

“* * * the question as to what the public interests

require is committed to the absolute discretion of the

attorney-general, and it cannot be made the subject of

inquiry by the courts. If he abuses the great power

intrusted to him, a remedy may be found in his re-

moval from office, or in the election of a successor

worthy of the high position.”

31

(ce) The designation could not be attacked collaterally for

want of public interest.

Judge Woolsey properly denied the appellants’ motions in

so far as they attacked the designation order and the appel-

lants have not sought to obtain a review of such denial.

If a collateral attack could be made on that ground even

in the very suit in which jurisdiction was exercised, chaos

and uncertainty would result ; and if permitted in a collateral

suit, no judgment or decree made by a designated Judge

would ever have finality; and a Judge of the District Court

would be given the power to determine the validity of a

designation—a power certainly not contemplated by any pro-

vision of the Judicial Code.

(d) It is inconceivable that the fact of public interest can

be inquired into, but, in any event, inquiry must necessarily

be made in some procedure adequate for the purpose.

In so important a matter as the determination that a

Senior Circuit Judge, who is actually holding a District

Court under a designation, was acting as an usurper because

of a lack of public interest sufficient to warrant his designa-

tion—certainly the determination of lack of public interest

should not be reached in any casual manner or on the basis

of unsupported allegations or without some opportunity for

the parties vitally interested in the determination, including

the designating Judge, to make some proof of the facts in

the situation. This would seem to be obvious and funda-

mental.

Yet this Court is asked to reach this determination on a

record which contains no basis whatsoever for such a deter-

mination. The bill of Johnson alleges that there was “no

question of public interest involved” (IR. 55), and the bills

of Johnson and Boehm contain identical allegations that the

Designation Order was “irregular, improper, without legal

warrant or justification, and void” (R. 103, 121). See also

(R. 97).

These allegations of conclusions are ail made in conjunc-

tion with allegations which show that the conclusions were

32

based upon contentions that the Designation Order was a

violation of Rules l-a and 11-a, and not that they were void

for lack of public interest to justify the making thereof,

These unproven allegations constitute the on/y basis in the

record for any finding of lack of public interest.

Without anything more in the record than these unsup-

ported allegations by way of conclusions, without any proof

to sustain them, without any issue taken thereon, without

any trial of that issue, the petitioners now ask this Court

to determine as a fact that there was no public interest to

justify the Designation Order. While it is inconceivable

that the fact of public interest may be inquired into, we sub-

mit that if the fact of public interest is open to investigation,

either directly or collaterally, there must be some procedure

involving a trial of the issue, and that an essential part of

that procedure would involve an examination of the desig-

nating Judge (be he Chief Justice of the United States, or

the Circuit Justice, o. the Senior Circuit Judge) as to the

public interest upon which he relied in making the designa-

tion.

People vy. Ballard, 134 N. Y. 269, referred to at page 30,

supra,is in point. It held that in a case in which the Attor-

ney General of the State of New York was to act “if the

public interest requires” the fact of public interest was not

an issuable fact, saying (134 N. Y. 293):

“If it were held otherwise, upon what evidence could

the court proceed?”

The Court shows that if the question could be examined

into, an intolerable multiplication of issues would be pro-

duced and that they could not be easily defined by pleadings

and unless so defined could not be tried (134 N.Y. 293).

ie) Designations of Circuit Judges to sit in a particular

case are proper.

We have already pointed out that the making of designa-

tions for the trial of a particular case or a class of cases has

been a uniform practice (R. 554, 555, 655, 659, 660, 661,

33

662). The right to do so was approved in United States v.

Gill, 292 Fed. 136 (C. C. A., 4th). The right to do so was

in the mind of Congress in 1911 in enacting Section 22 (see

pp. 21, 22, supra). See State v. Leib, 17 N. M. 270, 125 Pac.

601, G02 (1912).

Section 23, Title 28, of the United States Code provides,

among other things, that—

“It shall be the duty of the district or circuit judge

who is designated and appointed under either of sec-

tions 17 to 22 of this title, to discharge all the judicial

duties for which he is so appointed, during the time

for which he is so appointed; * * *.” (Italics ours.)

thereby expressly contemplating that the designation may

have been for particular duties and for a limited time.

Apart from the reasons for standing designations in a dis-

trict like the Southern District of New York, and apart from

the reasons specified by the statute for the designation of

District Judges of other districts or circuits, the public in-

terest requiring a designation will necessarily relate to some

particular business of the Court. It was manifestly the

intention of the Congress to confer the power on the Chief

Justice. the Circuit Justice or the Senior Circuit Judge to

designate Circuit Judges to hear and determine particular

matters deemed of special importance. The contrast between

said Section 22, governing the designation of Circuit Judges,

and Sections 17, 19, 20, 24 and 25, governing the designation

of District Judges, puts that beyond doubt or debate.

(f) The uniform and general practice since the adoption

of the Judicial Code in 1911, of the Senior Circuit Judges in

designating themselves and in making both general standing

designations and designations for a particular case, should

put the question at rest.

Stuart vy. Laird, 1 Cranch. 299.

The universal practical construction for so long a time

should be conclusive.

prrerreses m : ‘ —

os a

34

United States v. Hermanos y Compania, 209 U. §.

337, 339.

Robertson v. Downing, 127 U. 8. 607, 613.

United States vy. G. Falk & Brother, 204 U. 8. 143,

at ]

152.

The legislative history of the revision of 1922 is of great

significance.

The bill originated in the House. By Section 6 of the

House bill, Section 18 of the Judicial Code was rephrased, as

stated supra (pp. 24, 25), so as to express the same thought

in simpler and fewer words.

When the bill came to be reported by the Senate Judiciary

Committee to the Senate, Sections 15 to 18 of the Judicial

Code had been completely recast. Section 13, as so recast,

provided for the designation of District Judges by the Senior

Circuit Judge (a) on account of the disability or absence

of the District Judge, (b) “in aid of a District Judge” on

account of the accumulation or urgency of business, and (c¢)

“in aid of a District Judge when the public interests so re-

quire”; and Section 14 was amended to read as follows:

“(1) A circuit judge may be designated to act as

district judge in any district of his circuit or of at-

tached territory in any case where a district judge

might be so designated.

(2) Such designation may be made by the senior

circuit judge (who may designate himself) whenever

he is satisfied that the occasion therefor exists and

that the public interests so require” (Congressional

Record, Vol. 62, Part 3, p. 2584).

In reading the bill as reported to the Senate, Senator Cum-

mins, Chairman of the Judiciary Committee, explained that

Section 14 thereof, just above quoted, did not differ essen-

tially from the present law, and with reference to subdivision

(2) thereof he said:

“That is simply a better and more complete expres-

sion of the thought of the existing law” (Congressional

Record, Vol. 62, Part 5, p. 4852).

35

The statute then provided (Judicial Code, Sec. 18) and

now provides (Sec. 22, of Title 28, of United States Code)

for the designation by the Chief Justice, the circuit justice

or the senior circuit judge of “any circuit judge” of the

circuit. The words “any circuit judge” are all-inclusive

and necessarily include the senior circuit judge.

Some of the Senators thought the power of designation

subject to abuse. Others objected to the provisions for annual

conventions to be called by the Chief Justice; and various

amendments were proposed, but all of the proposed amend-

ments to the bill as reported by the Judiciary Committee

were rejected (Congressional Record, Vol. 62, Part 5, pp.

5166-5174) and the bill as reported by the Judiciary Com-

mittee was passed by the Senate (id., p. 5174).

The Conference Committee reported a bill which, in gen-

eral, followed the original House bill rather than the recast

of it made by the Senate Judiciary Committee, and the bill

so reported became a law. The first sentence of Section 18

of the Judicial Code, as finally amended (now Sec. 22, of

Title 28, of the United States Code), is the same as said

Section 18 in the original House bill, with the following

provisions added :

(1) The provision for the designation by the Chief

Justice of Judges of the United States Court of Customs

Appeals for service in the Supreme Court of the District

of Columbia or the Court of Appeals for the District

when requested by the Chief Justice of either of said

courts ;

(2) The provision that designated Judges “shall have

all the powers and rights and perform all of the duties

of a judge of a district or a justice of the court to which

he has been assigned,” save for the exceptions noted,

and that in case of an unfinished trial before the expira-

tion of the period of service, such period shall be deemed

extended until the trial is concluded: and

36

(3) The provision empowering a designated Judge,

despite his absence from the district and the expiration

of the time limit in his designation, to decide all matters

submitted to him, to decide motions for new trials, settle

bills of exception, and the like (Congressional Record,

Vol. 62, Part 9, p. 9497).

The substantial re-enactment of said Section 18 of the

Judicial Code, with the addition of the provision giving a

designated Judge all of the rights and powers and duties of

a District Judge, save for the exceptions, and the rejection

of all amendments limiting the power of designation, sets at

rest any possible question as to the regularity of the well

known practice of Senior Circuit Judges to designate them-

selves, both generally and to hear and determine specific

matters.

Such re-enactment was a confirmation by the Congress

of the practice that had prevailed since the adoption of

the Judicial Code and was an adoption of that construction

of said Section 18 of the Judicial Code by the Congress itself

(Sec. 22, of Title 28, of the United States Code), which

should now be conclusive.

U.S. v. G. Falk & Brother, 204 U. S. 143, 152.

Copper Queen Mining Co. vy. Arizona Board, 206

U.S. 474, 479.

U.S. v. Hermanos y Compania, 209 U.S. 387, 339.

Heald vy. District of Columbia, 254 U. 8. 20, 23;

65 L. Ed. 106, and exhaustive note citing cases.

Brewster v. Gage, 280 U. S. 327, 337.

McCaughn v. Hershey Chocolate Co., 283 U.S. 488,

492, 493.

Old Colony R. Co. v. Commissioner, 284 U. 8S. 552,

557.

(g) Asa properly designated Judge either under his stand-

ing designation of March 20, 1930, or under his designation

of August 25, 1932, Judge Manton had all the rights, powers

and duties of a District Judge.

37

It is expressly so provided by statute. By Section 23, of

Title 28 of the United States Code (Sec. 19 of the Judicial

Code), a judge so designated is commanded “to discharge all

the judicial duties for which he is so appointed,” thus plainly

contemplating designation for particular duties, i. e., par-

ticular cases, “and all the acts and proceedings in the courts

held by him, or by or before him * * * shall have the same

effect and validity as if done by or before the district judge

of the said district.”

And Section 22, Title 28, of the United States Code (Sec.

18 of the Judicial Code) provides that a judge so designated

“shall have all the powers, and rights, and perform all the

duties, of a judge of the district * * * (excepting the power

of appointment to a statutory position or of permanent des-

ignation of newspaper or depository of funds).” The excep-

tions emphasize the inclusion of all other powers.

This Court said in Ea parte United States, 226 U.S. 420,

23, 424:

“It is moreover beyond question that the statute

while contemplating as a general rule the holding of

District Courts by district judges and as a general

rule for holding Cireuit Courts of Appeal by circuit

judges, nevertheless expressly directs when the occa-

sion requires (Sec. 18) the assignment by the senior

judge, or the circuit justice, or the Chief Justice of

a circuit judge to hold a District Court and endows

a judge so assigned with all the authority of a dis-

trict judge (Sec. 19), giving power in case of such

designation to hold separately at the same time a

District Court in such district, and to discharge all

the judicial duties of the district judge therein (Sec.

14). The statute therefore clearly gives to the cir-

cuit judges the rights and powers of judges of the

new District Courts, and calls such powers into play

when assigned according to law.”

38

POINT II.

The District Judges were without power to deprive

designated Judges, whether Circuit Judges or District

Judges, of the authority and jurisdiction vested in them

by the statute.

The concurrence of District Judges in designations is not

required, though the concurrence of a majority of the Cir-

cuit Judges in rules of the District Court regulating the

practice in suits in equity is required by Equity Rule 79.

Judges designated to hold a District Court are neither

outsiders nor intruders in the district, as Judge Woolsey

seemed to suppose. They are expressly required by statute

without their consent to accept such assignment and are

expressly given all of the powers and rights and are com-

manded to perform all the duties of a Judge of the district,

save for the specified exceptions (Sec. 22, Title 28, United

States Code; Sec. 18, Judicial Code), and by Section 23, they

are commanded to perform all the judicial duties for which

they are appointed during the time for which they are so

appointed. Yet under Rule 1-a adopted by the District Judges

they can do no “work” at all except “such work” as may be

assigned by the Senior District Judge. Although, in the opin-

ion of the Chief Justice, a Circuit Justice or the Senior Cir-

cuit Judge, the public interest may require the designation of

a Circuit Judge to hold a District Court, the Judge so desig-

nated must, under said rule, get the consent of the Senior

District Judge before he can do any “work” in the Court

which he is designated to hold, and without such consent he

is an “outsider,” an “intruder” and, if he does do any work,

an “usurper.”

Section 13, Title 28, of the United States Code (Sec. 9 of

the Judicial Code) provides:

“Sec. 13. Courts open as courts of admiralty and

equity. The district courts, as courts of admiralty and

as courts of equity, shall be deemed always open for

39

the purpose of filing any pleading, of issuing and re-

turning mesne and final process, and of making and

directing all interlocutory motions, orders, rules, and

other proceedings preparatory to the hearing, upon

their merits, of all causes pending therein. Any dis-

trict judge may, upon reasonable notice to the parties,

make, direct, and award, at chambers or in the clerk’s

office, and in vacation as well as in term, all such

process, commissions, orders, rules, and other proceed-

ings, whenever the same are not grantable of course,

according to the rules and practice of the court.”

(Italics ours. )

Federal Equity Rule No. 1 similarly provides. Federal

Equity Rule No. 6 provides:

“Bach District Court shall establish regular times

and places, not less than once each month, when mo-

tions requiring notice and hearing may be made and

disposed of: ‘et the judge may at any time and place,

and on such metice, if any, as he may consider rea-

sonable, make and direct all interlocutory orders, rul-

ings and proceedings for the advancement, conduct and

hearing of causes, * * *%

The manifest intention ot said statute and rules was to

insure to suitors accessibility to the Courts at all times and

places. The Court is not a place; the Judge constitutes the

Court. and he is commanded by the statute to keep his Court

“always open” for the purpose, among others, of making in-

terlocutory orders and under said Equity Rule No. 6 he may

make such orders “at any time and place.”

As was said by Judge Hough in Ackerson V. United States,

15 Fed. (2nd) 268 (C. @. A., 2nd, 1926), at 270:

“The power of suspension (of a sentence) is lodged

in the court, and any acting judge constitutes the

Distriet Court.”

That the orders in the Brake Shoe suit set aside by Judge

Woolsey were interlocutory admits of no doubt. See Horn

vy. Pere Marquette, 151 Fed. 626 (C. C., E. D. Mich., 8. D.

1907, opinion by Judge Lurton).

GERM

40

The appointment of receivers is usually emergency busi-

ness. The suitor has the right to apply to the Judge wherever

he can find him. But although a designated Judge is given

all the rights, powers and duties of a District Judge, if a

suitor applies to him, no matter how great the emergency,

under the District Judges’ Rule lL-a, the designated Judge

(in this case the Senior Circuit Judge) must seek out the

Senior District Judge and get the latter’s consent to his

doing “such work” before he can act; and under Rule 11-a,

whether he be a designated Judge or a District Judge, he

cannot act on an application for the appointment of receivers

unless “assigned to hold the bankruptcy and motion part.”

The Judge so assigned may not be available. He may be

disqualified. [Indeed the records of the District Court dis-

close that when a motion was later made in the Johnson suit

before Judge Patterson, the Judge assigned to hold the bank-

ruptey and motion part on August 26, 1932, he stated that

he considered himself disqualified by reason of the: fact that

the firm of which he was a member when he went on the

bench had been counsel for the Manhattan Railway.] — Still,

no matter how urgent, the business must wait until all the

Judges can make another assignment, if said Rule 11l-a have

the effect ascribed to it by Judge Woolsey, or until the

designation of another Judge by the Senior Cirenit Judge

under Section 24, and even such Judge, though specially des-

ignated because of the disqualification of the Judge holding

the motion part, would still have to secure an assignment to

that part and the consent of the Senior District Judge before

he could act, if said rules have the effect claimed. Manifestly

that would defeat the very purpose of said Section 13 of the

United States Code and of Equity Rules 1 and 6 and the

express provisions of said Sections 22 and 23.

No rule can “enlarge or restrict jurisdiction” or “abrogate

or modify substantive law.”

Washington-Southern Co. ¥v. Baltimore Co., 265

U. S. 629, 635.

Hudson vy. Parker, 156 U. 8. 277

41

Davidson Marble Co. v. Gibson, 213 U.S. 10.

General Electric Co. v. Marvel Co., 287 U. 8. 450,

434.

Venner v. Great Northern Railway, 209 U. 8. 24, 35.

Designated Judges, whether Circuit Judges or District

Judges of other districts, derive their power and authority

from the statute. No District Judge or group of Judges can

by so-called rules restrict or take away the jurisdiction so

conferred. They cannot by rule or otherwise make a Judge

designated under the statute by the Chief Justice, a Circuit

Justice or the Senior Circuit Judge, an “usurper” or an “in-

truder” in their “house,” nor can they thus deprive him of

the jurisdiction conferred on him by statute, much less of his

title to office.

Petitioner Boehm’s main contention appears to be that re-

gardless of whether the questions argued have been properly

raised, and regardless of the vast interests involved in the

litigation, the Supreme Court should undertake to exercise

a supervisory power over a disagreement between the senior

circuit judge and the district judges in matters of adminis-

tration (Boehm brief, Points I and II) :

It undoubtedly is the fact, and indeed it is apparent on

their face, that Rules l-a and L1-a were adopted for the very

purpose of preventing the exercise of jurisdiction by a circuit

judge designated under said Section 22. If that was their

purpose, as the petitioners themselves appear to suggest, they

are plainly invalid. There is no warrant whatever in the

statute for the exercise of such authority. The district

judges are given no voice in the designation of cireuit judges

to hold district courts, not even so much as to make recom-

mendations or requests, though of course a proper request

would be heeded by the designating authority.

A rule of the district judges that a designated judge should

not hear applications for the appointment of receivers would

plainly be an unlawful attempt to limit or restrict jurisdic-

tion conferred by the statute. The like cannot be done by

indirection.

42

If the sued mules ame to be considered as an arrangement

for their comvemiemee, among judges exercising co-ordinate

jurisdiction, as mere “calendar” rules, they are entirely in-

nocuous as far as any question now before the court is con-

cerned. They would not deprive even the judges who signed

them of jurisdiction. They certainly would not be permitted

to prejudice the rights of litigants.

POINT III.

So-called Rules l-a and 11-a adopted by the District

Judges are invalid.

For convenience we repeat them:

“l-a. Any judge designated to sit in the District

Court for the Southern District of New York, shall

do such work only as may be assigned to him by the

senior district judge.”

“Il-a. All applications for the appointment of re-

ceivers in equity causes, in bankruptcy causes and any

other causes (except where a receiver in bankruptcy

may be appointed by a referee as provided in the Bank-

ruptcy Rules) shall be made to the judge assigned to

hold the Bankruptcy and Motion Part c the business

of the court and to no other judge.” (Italies ours.)

Rule l-a frankly restricts the power of designated Judges

only. It does not apply to the regularly appointed District

Judges. The designated Judges may do “such work only” as

may be assigned them by the Senior District Judge.

Rule 11-a restricts the jurisdiction of all, whether District

Judges or designated Judges. But both rules are of a piece.

The power of the District Court to make rules is to be

found in Section 731, Title 28 of the United States Code.

Section 731 provides:

“Rules of practice in district courts. The district

courts may, from time to time, and in any manner not

43

inconsistent with any law of the United States, or

with any rule prescribed by the Supreme Court under

Section 730 of this title, make rules and orders direct-

ing the returning of writs and processes, the filing of

pleadings, the taking of rules, the entering and mak-

ing up of judgments by default, and other matters in

vacation, and otherwise regulate their own practice

us may be necessary or convenient for the advancement

of justice and the prevention of delays in proceedings.”

(a) Rules 1-a and I1-a were not adopted in accordance

with the requirements of the statutes.

If they are rules of practice at all, then, in so far as they

affect the practice in equity suits, they are necessarily rules

of practice in equity. Rule 11-a in express words applies to

“the appointment of receivers in equity causes.”

In that view they required the concurrence of a majority

of the Circuit Judges.

Section 730, Title 28, United States Code.

Federal Equity Rule No. 79.

They do not purport to have had such concurrence (R. 16)

and in fact they did not have it (R. 554 fols. 1662, 1663).

Although that is undenied, petitioner Boehm seys that a

majority of the circuit judges may “verbally or by tacit ac-

quiescence” have concurred (Boehm brief, p. 48). That

emphasizes the character of said rules. The rights of liti-

gants certainly cannot be affected by rules dependent upon

verbal or tacit acquiescence of judges.

To get around the necessity of the concurrence of a ma-

jority of the Circuit Judges, Judge Woolsey minimized Rule

ll-a to a mere direction to litigants, a signpost pointing “to

the door of the room” where particular business could be done

(R. 714, fol. 2140) ; but for the purpose of depriving Judge

Manton of jurisdiction and even of his status as a Judge,

Judge Woolsey magnified it into a rule of substantive law,

with the consequence that a suitor who should submit his

business to a Judge sitting behind the wrong door, but other-

wise of competent jurisdiction, would later find to his sorrow

(qppanner: cxnaronemmmanes Po LOS EESTI INP PA AIAG ——r

i

. 44

that the acts relied on were coram non judice and subject to

collateral attack, because not done by a Judge at all but

only by an individual without even the color of authority, a

mere “usurper.”

It matters little which horn of the dilemma be chosen. If

the rule is a mere signpost, it is not a rule of practice at all

and said Section 731 furnishes no warrant for it. If it is a

rule of such plenitude of power as to deprive a Judge acting

contrary to it even of his status as a Judge, it certainly can-

not affect proceedings in equity unless it have the concur-

rence of a majority of the Circuit Judges.

We confess our inability to follow Judge Woolsey’s rea-

soning that “practice in equity receivership cases only com-

mences after the making of the order of appointment” (R.

714, fol. 2141). We had supposed that filing the bill was

ordinarily the first step in the practice in an equity case, the

same as in any other case. That gave the Court jurisdiction,

and Judge Woolsey holds that the District Court still has

jurisdiction of the Brake Shoe suit solely by reason of the

filing of the bill, even after all the interlocutory orders have

been vacated (R. 720).

Nor considered merely as “yeneral” rules were they

adopted in accordance with the requirements of Section 731.

The statute gives power to make rules to the “District

Courts,” and not to the Judges thereof or any number of such

Judges. The records of the Court show that when these rules

were adopted by the eight regularly appointed Judges of the

Southern District of New York, Circuit Judge Julian W.

Mack was holding a District Court for the Southern Dis-

trict of New York pursuant to designation of the Chief Jus-

tice, dated November 11, 1930, made under Section 201 of

the Judicial Code (U. S. Code, Tithe 2s, Sec. 214), that

Circuit Judge Manton was holding a District Court for the

Southern District of New York pursuant to standing desig-

nation and actually sitting in certain matters, that Circuit

Judges Learned Hand and Augustus Hand had standing

designations to hold a District Court for the Southern Dis-

trict of New York, and that United States District Judge

William I. Grubb was holding a District Court in the South-

x ee er TOPLAS ne

ee -

45

ern District pursuant to designation of the Chief Justice.

Although these five designated J udges had “all the powers”

of a District Judge “save only the power of appointment to

a statutory position or of permanent designation of news-

paper or depository of funds,” there is no pretense that any

of them or any of the Circuit Judges for the Circuit, let

alone a majority of them, were so much as consulted in the

making of the rules (R. 694, 714).

Empowered to hold District Courts, with all the rights,

duties and powers of the District Judges, they necessarily

had, perforce of the express provisions of said Section 731,

the power and right to make rules governing the practice in

their courts.

(b) The so-called rules are not rules of practice.

Plainly Rule 1-a restricting the jurisdiction of a designated

Judge so that he may do “such work only” as the Senior Dis-

trict Judge permits is not a rule of practice. The Senior Dis-

trict Judge has nothing to say about the designation of Cir-

cuit Judges to hold District Courts. Whether such designa-

tion shall be made is solely for the Chief Justice, the Circuit

Justice or the Senior Circuit Judge to determine.

Neither the Senior District Judge, nor all of the District

Judges together, are given any power to say what “work” a

designated Judge may do or whether he shall be permitted

to do any work at all, and they cannot confer such power

upon themselves by passing a so-called rule and calling it a

rule of practice.

Nor is Rule 11-a in any true sense a rule regulating the

practice concerning “the returning of writs and processes,

the filing of ,leadings, the taking of rules, the entering and

making up of judgments by default * * * matters in vaca-

tion” (Sec. 73 of Title 28 of the United States Code) or “the

practice, proceedings and process, mesne and final” (Federal

Equity Rule 79), or the like.

It does not even point to the door of the room where par-

ticular business can be transacted, as Judge Woolsey sup-

416

posed. It merely points to the Judge “assigned” to hold a

particular part. That Judge and he alone is to keep his

Court “always open” for the purpose of entertaining appli-

cations for interlocutory orders appointing receivers in

equity. That Judge and he alone is to make “at chambers

or in the clerk’s office, and in vacation as well as in term,”

interlocutory orders appointing receivers in equity, although

the statute says “any district judge may, upon reasonable

notice to the parties, make, direct and award, at chambers or

in the clerk’s office, and in vacation as well as in term, all

such process, commissions, orders, rules and other proceed-

ings, Whenever the same are not grantable of course, accord-

ing to the rules and practice of the court.” (Italics ours.)

Rules which purport to give the Senior District Judge

power to tell a designated Judge what “work” he can do, and

which forbid all the Judges except one to exercise the juris-

diction conferred upon them by the statute, are not rules

of practice. They are attempts to restrict the jurisdiction

conferred by statute on designated Judges and District

Judges as well.

(¢) The two rules do not meet the requirement of Section

731 that they be “not inconsistent with any law of the United

States or with any rule prescribed by the Supreme Court

under Nection 730.”

They are clearly inconsistent with the plain statutory pro-

Visions of Sections 22 and 23, Title 28, of the United States

Code considered under Point | above, depriving the desig-

nated Judges of the broad powers and interfering with their

performance of the broad duties imposed upon them by those

statutes. These rules are also clearly inconsistent with the

plain statutory provisions of Section 13 of Title 28, consid-

ered under the preceding Point IIT above. They are also

plainly inconsistent with Federal Equity Rules Nos. 1 and 6;

Equity Rule No. 1 being practically a copy of Section 13.

Federal Equity Rule 6 provides:

“* * * Dut the judge may at any time and place,

and on such notice, if any, as he may consider reason-

Ley SEE oe aw

aes

-

47

able, make and direct all interlocutory orders, rulings

and proceedings for the advancement, conduct and

hearing of causes.” (Italics ours. )

Rule 1-a in effect says that Equity Rule 6 shall not apply

to a designated Judge except upon assignment from the

Senior District Judge, and Rule 11-a says that Equity Rule 6

shall not apply to any Judge of the District Court whether

regularly appointed or designated, in so far as the interlocu-

tory order sought has to do with the appointment of a

receiver.

Rules 1-a and 11-a are also inconsistent with Sections 17,

18 and 28, Title 28, of the United States Code.

Rule 1-a is also inconsistent. with Sections 375, 376, 378,

387, 452, 647, 739, 776, Title 28, and 611, Title 18, of the

United States Code.

(d) The two rules are not authorized by Nection 27, Title

28, of the United States Code.

Section 27 provides:

“DISTRICTS WITH MORE THAN ONE JUDGE; DIVISION OF

BUSINESS. In districts having more than one district

judge, the judges may agree upon the division of busi-

ness and assignment of cases for tria! in said district ;

but in case they do not so agree, the senior circuit

judge of the circuit in which the district lies, shall

make all necessary orders for the division of business

and the assignment of cases for trial in said district.”

Judge Woolsey, who was one of the District Judges who

made these rules, did not attempt to support these two rules

by Section 27. He found his only authority for them in

Section 731 (R. 713, 883, fols. 2648-2649). The appellants,

however, now seek to support Rule 11-a under Section 27 as

being a division of business among the Judges. That rule is

clearly not in any sense a division of business nor an assign-

ment of cases for trial. A rule which requires a litigant to

make his application for a receiver to the Judge assigned to

the Motion Part, has no relation whatsoever to the division

of business between the individual Judges. An agreement as

ee |

48

to the division of business among the Judges is an arrange-

ment by which they determine from day to day, or week to

week, as to what individual Judge shall actually sit on a

particular day in the Motion Part, as well as in the other

parts of the court. Obviously, notwithstanding Rule L1-a,

disagreements might frequently arise as to who was actually

to sit in the Motion Part.

The petitioner Boehm says, on page 39 of her brief, with

relation to said Section 27 that before Judge Manton acted

the eight District Judges had “unanimously agreed upon the

distribution among them of the Court's business for the cur-

rent year. They had unanimously agreed upon and posted a

schedule setting forth the sessions which each of them was

holding during the period and the character of the business

which each would then administer.” That statement evi-

dently refers to the schedule of “Assignment of judges and

division of work” referred to by Judge Woolsey (R. 701).

Said schedule of assignments is an example of an agree-

ment among judges for the division of business under said

Section 27. It did assign individual judges to the particular

parts of the court for the stated period. It did eliminate the

chance of disagreement as to what judges should hold par-

ticular parts at stated times, but said Rules l-a and 11-a de-

cided no qiestion as to What any particular judge should do

or what part he should hold.

Said Section 27 was wholly unnecessary to enable the Dis-

trict Court judges to agree upon the assignments of judges.

That was the natural thing for them to do and they needed

no statutory authority. The obvious purpose of the statute

was to give final authority to the Senior Circuit Judge if

there was a dispute, and the matter of special significance is

that he was given the final word. The statute plainly recog-

nizes that his is the chief administrative authority for the

circuit. The Senior Circuit Judges compose the annual con-

ferences to be called by the Chief Justice (Sec. 218, Title 28,

U. 8S. Code).

The petitioner Boehm, recognizing the infirmities of the

petitioners’ case, frankly asks this Court to lay to one side

ANS GPE CRA IO ORT A oe Bt PEELE II os Om a .

eee poses AERO MT

49

the rules governing its review of the decisions of the lower

courts and to exercise some general supervisory authority.

Lut the statute vests the supervisory authority in such mat-

ters of administration as the division of business in the

senior Circuit Judge.

The statute neither expressly nor by implication gives the

resident district judges, whether one or more than one, any

supervisory authority over the designation of Senior Circuit

Judges to hold District Courts. The statute does not pro-

vide that such designations be made on their request, and

it gives them no power to determine what duties a designated

judge shall perform.

To the contrary it says, with respect to Circuit Judges,

that they “shall have all the powers, and rights, and per-

form all the duties, of a Judge of the district” save for the

powers expressly excepted (Sec, 22), with respect to desig-

nated Judges from other districts or circuits, that they “may

hold separately and at the same time a district court in the

district or territory to which such Judge is designated and

assigned and discharge all the judicial duties of the district

or territorial judge therein” (Sec. 18), and with respect to

either a designated District or Circuit Judge, that he shall

“discharge all the judicial duties for which he is so appointed,

during the time for which he is so appointed; and all the

acts and proceedings in the courts held by him, or by or be-

fore him, in pursuance of said provisions, shall have the same

effect and validity as if done by or before the district judge

of the said district” (See. 23).

True, disagreements might arise between designated judges

and the resident district judge or judges over the division

of business. If said Section 27 was intended to apply to

such disagreements, as well as to disagreements among or

between the resident district judges, it is quite plain that

the designated judge must have a voice in any division of

business affecting the performance of his duties, and that in

case of disagreement the Senior Circuit Judge would have

the final say, for it cannot be supposed that it was the in-

tention of Congress to give the resident district judges, in

districts having more than one, power over the duties to be

Qyprrarecwscmcren wt

00

performed by a designated judge not given to the resident

district judge in a district having but one. If that had been

the intention, it would have been stated in express terms and

not indirectly by conferring power upon the Senior Circuit

Judge to act as umpire in the case of disagreements over the

division of business between district judges.

If, however, said Section 27 was intended to apply only

to disagreements among the resident district judges over

the division of business, it necessarily follows that it was not

intended to affect in any way the discharge of duties by a

designated judge which were to be governed solely by the

express provisions of Section 23.

It is unnecessary to enumerate the many reasons which

might properly move the Chief Justice, the circuit justice or

the senior circuit judge to designate a circuit judge to hear

and determine a particular matter. The importance of the

matter alone might be a sufficient reason. The petitioner

Boehm refers to this case as one of “great economic, social

and even political significance” (p. 15). It did then involve

the publie interest.

It is well known that the District Courts of the Southern

District of New York, with all the help they can get from

outside, are not sufficiently manned to dispose expeditiously

of the business pending in those Courts (R. 556-559). As

petitioner Johnson says (brief, pp. 10, 11), a receivership

like that of the Interborough Rapid Transit Company de-

mands a great deal of time of the judge having jurisdiction

of it. If the Senior Circuit Judge felt that he was able,

with his appellate duties, to devote the necessary time and

thus to that extent relieve the District Courts of the pressure

of work upon them, he had the power under the statute to

designate himself for that reason alone, regardless of what

the district judges themselves might think about it. ‘he

sole responsibility and duty of decision was his, and no ar-

rangement among the resident district judges for the division

of business as between themselves could deprive him of his

power under the statute to act or of his jurisdiction, which

the parties to the suit invoked.

Sl

His so-called division of business order was separate and

distinct from the designation order, and indeed recited the

designation order (R. 178, fol. 534). It was made because

of said Rule 11-a and doubtless did construe it as a division

of business. On that construction, if said Section 27 was

intended to apply to disagreements between designated and

resident judges, he was the final authority. In our view,

however, said order was wholly unnecessary, just as said

rule was wholly ineffective to deprive him of the jurisdiction

conferred on him by statute.

Petitioner Boehm concedes, to be sure, for the sake of

argument, that designated judges are district judges for the

purpose of said Section 27 (Boehm brief, p. 47).

It matters little which hypothesis be accepted.

If designated judges are to be regarded as district judges

within the meaning of said section, said rules required the

assent of the designated judges and non-assenting judges

were not affected by them.

If, however, said section was intended to apply only to

disagreements among or between resident district judges,

then the senior Cireuit judge has the final word under said

Section 27, and under Section 22 he has the power to desig-

nate any circuit judge, including himself, whose powers and

duties are wholly defined by the statute and are not

dependent at all upon agreements or disagreements under

Section 27.

POINT IV.

Rules l-a and Il-a, even if valid, do not have the

effect of depriving a Judge of the jurisdiction conferred

upon him by the statute, whether he be a Judge de jure

or de facto.

Undoubtedly a rule affecting the rights of litigants has

the force of law, as, e.g., a rule limiting the time within

which a notice to set aside a judgment must be made.

Rio Grande Irrigation Co. vy. Gildersleeve, 174 U.S.

603.

Bprowsr rm NAPS “ n y 7

52

Likewise, an attorney who makes a contract for a division

of fees in violation of public policy and a rule of court

authorized by statute may not recover upon it.

Weil y. Neary, 278 U. S. 160.

The disregard of a procedural rule may constitute error

reviewable on appeal, but procedural rules may be waived

in the interest of justice and the disregard of them does not

affect the jurisdiction.

Abbott v. Brown, 241 U.S. 606.

“Every court of equity possesses the power to mould

its rules in relation to the time and manner of ap-

pearing and answering, so as to prevent the rule from

working injustice; and it is not only in the power of

the court, but it is its duty to exercise a sound dis-

cretion upon this subject, and to enlarge the time,

whenever it shall appear that the purposes of justice

require it.”

La parte Poultney v. City of LaFayette, 12 Peters

472.

“And it is also in the power of the court to suspend

its own rules, or to except a particular case from its

operation, whenever the purposes of justice require it.”

United States vy, Breitling, 20 How. 252.

See:

Woodbury v. Jergens Co., 61 Fed. (2d) 736 (C. C.

A., 2d, 1932).

An arrangement among Judges that one of them, i. e., the

one who happens to be assigned to hold a particular part,

shall transact a particular part of the business of the court

is, at most, an arrangement of convenience not affecting juris-

diction.

There are numerous State decisions to the effect that

despite rules for the apportionment of business into “parts,”

each Judge in every part has the power that any Judge has.

53

See:

Matter of Petition of Argus Co., 188 N. Y. 557.

State v. Lichtenberg, 4 Wash. 5538, 30 Pac. 659, 660

(1892).

Foley vy. Utterback, 196 Ta. 956, 195 N. W. 721, 722

(1923).

People vy. Barbera, 78 Cal. App. Rep. 277, 248 Pac.

304 (1926).

State v. District Court of Lewis and Clark County,

49 Mont. 158, 141 Pace. 151, 152 (1914).

Bradley v. Van Nostrand, 189 Cal. 457, 208 Pace.

690 (1922).

The appellants rely on Case y. United States, 14 Fed, (2d)

510 (C. C. A. 8th, 1926). In that case the Senior Circuit

Judge resolved a disagreemen

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